M/s. Rajat & Company Commodities Pvt. Ltd., Delhi V. DCIT, New Delhi

ITA 3721/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2764 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 22-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ATIQ AHMAD SENIOR
• Assessee Lawyers: VRN KUMAR
• Keywords: Search and seizure
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI L.P. SAHU, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4505/DEL./2016 (ASSESSMENT YEAR : 2012-13) ACIT, CENTRAL CIRCLE 7, VS. M/S. RAJAT & COMPANY CO MMODITIES NEW DELHI. PVT. LTD., R/O 4094-97, 1 ST FLOOR, NAYA BAZAR, DELHI 110 006. (PAN : AAFCR2108E) ITA NO.3721/DEL./2016 (ASSESSMENT YEAR : 2012-13) M/S. RAJAT & COMPANY COMMODITIES VS. ACIT, CENTRAL CIRCLE 7, PVT. LTD., NEW DELHI. R/O 4094-97, 1 ST FLOOR, NAYA BAZAR, DELHI 110 006. (PAN : AAFCR2108E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VRN KUMAR, ADVOCATE REVENUE BY : SHRI ATIQ AHMAD, SENIOR DR DATE OF HEARING : 26.03.2018 DATE OF ORDER : 27.03.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : ITA NO.4505/DEL./2016 ITA NO.3721/DEL./2016 2 PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE BEING DISPOSED OF BY WAY OF CONSOLIDATE D ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 7, NEW DELHI (HEREINAFTER REFERRED T O AS THE REVENUE) BY FILING THE PRESENT APPEAL, SOUGHT TO S ET ASIDE THE IMPUGNED ORDER DATED 23.05.2016 PASSED BY LD. CIT(A PPEALS)-7, NEW DELHI QUA THE ASSESSMENT YEAR 2012-13 ON THE GR OUNDS INTER ALIA THAT :- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN REDUCING THE RATE OF G.P. FROM 1.9 2% TO 1.50% WHEN THE FORMER WAS THE G.P. RATE SHOWN BY TH E ASSESSEE ITSELF FOR THE POST-SURVEY PERIOD. 3. THE APPELLANT, M/S. RAJAT & COMPANY COMMODITIES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE COMP ANY) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNE D ORDER DATED 23.05.2016 PASSED BY LD. CIT(APPEALS)-7, NEW DELHI QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUND THAT :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AUTHORITIES BELOW ERRED IN REJECTING U/ S 145 (3) OF THE ACT THE AUDITED BOOKS OF ACCOUNTS AND IN APPLYING AN ESTIMATED G.P. RATE OF 1.50% ON THE TURNOVER. SUCH ACTION BEING ARBITRARY, ERRONEOUS AN D UNJUST MUST BE QUASHED WITH DIRECTIONS FOR RELIEF. ITA NO.4505/DEL./2016 ITA NO.3721/DEL./2016 3 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE COMPANY IS I NTO THE BUSINESS OF FOOD GRAINS AND PULSES. DURING THE SEARCH AND S EIZURE OPERATION CONDUCTED AT THE PREMISES OF THE ASSESSEE COMPANY, LOOSE DOCUMENTS INCLUDING STOCK REGISTERS, WORK SHEETS. E TC. WERE IMPOUNDED. AO FOUND MATERIAL IRRECONCILIATION IN T HE IMPOUNDED BOOKS/MATERIAL WITH FINAL ACCOUNTS AND CONSEQUENTLY , REJECTED THE TRADING RESULTS OF THE ASSESSEE COMPANY. THE ASSES SEE COMPANY HAS FAILED TO RECONCILE THE TRADING RESULTS BY FURN ISHING THE COMPLETE FACTS AND FIGURES RELATING TO BUSINESS ACT IVITIES, QUANTITATIVELY AND CORRESPONDING SALE PURCHASE FIGU RES WITH THE ENTRIES CONTAINED IN THE SUBSIDIARY BOOKS. ASSESSE E COMPANY DECLARED TURNOVER OF RS.2,76,72,88,863/- WITH GROSS PROFIT AT RS.2,78,77,299/- @ 1.01% OF THE TOTAL TURNOVER. AO BY TAKING INTO ACCOUNT THE GP RATE DECLARED BY THE ASSESSEE COMPAN Y FOR THE PERIOD 11.01.2012 TO 31.03.2012 AT 1.92% ON A TURNO VER OF RS.98.85 CRORES AND DECLARED OVERALL GP RATE FOR TH E PERIOD AT 1.01% ON TOTAL TURNOVER OF RS.276.72 CRORES WHICH H AVE BEEN REJECTED BY THE AO WHO HAS ESTIMATED THE GROSS PROF IT AT 1.92 INSTEAD OF 1.01% DECLARED BY THE ASSESSEE COMPANY A ND THEREBY MADE AN ADDITION OF RS.2,52,54,647/-. ITA NO.4505/DEL./2016 ITA NO.3721/DEL./2016 4 5. ASSESSEE COMPANY CARRIED THE MATTER BY WAY OF FI LING APPEAL BEFORE THE LD. CIT (A) WHO HAS REDUCED THE GP RATE FROM 1.92% AS ASSESSED BY THE AO TO 1.50%. FEELING AGGRIEVED, TH E ASSESSEE AS WELL AS REVENUE HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. UNDISPUTEDLY, BY TAKING INTO ACCOUNT VARIOUS DOC UMENTS SEIZED DURING THE SEARCH AND SEIZURE OPERATION, AO REJECTED THE BOOKS OF ACCOUNT AND TRADING RESULTS RELIED UPON BY THE ASSESSEE COMPANY IN DECLARING ITS INCOME. IT IS ALSO NOT IN DISPUTE THAT BOTH AO AS WELL AS LD. CIT (A) HAVE PROCEEDED TO ASSESS THE INCOME ON THE BASIS OF ESTIMATED GROSS PROFIT. DURING THE IM MEDIATE PRECEDING YEARS, THE TRADING RESULTS OF THE ASSESSE E COMPANY WERE AS UNDER :- PERIOD SALES GROSS PROFIT NET PROFIT GP RATIO NP RATIO 01.04.11 TO 10.01.12 1778718327.89 8880171.78 (-)6583199.34 0.50% NA 11.01.12 TO 31.03.12 988570535.29 18997127.54 15053135.72 1.92% 1.53% 01.04.11 TO 31.03.12 2767288863.18 27877299.31 8469936.07 1.01% 0.31% ITA NO.4505/DEL./2016 ITA NO.3721/DEL./2016 5 8. AO PROCEEDED TO ESTIMATE THE GP RATE MERELY ON T HE BASIS OF FACT THAT DURING THE PERIOD 11.01.2012 TO 31.03.201 2, ASSESSEE COMPANY ITSELF HAS DECLARED ITS GP RATE OF 1.92% ON A TURNOVER OF RS.98.85 CRORES. 9. LIKEWISE, CIT (A) ALSO TAKEN INTO ACCOUNT PRE-SU RVEY PERIOD AND POST SURVEY PERIOD TO ESTIMATE THE GP RATE WHIC H IS EXTRACTED AS UNDER :- PARTICULARS PERIOD SALES GROSS PROFIT GP RATIO PRE SURVEY PERIOD 01.04.11 TO 10.01.12 1778718327.89 8880171.78 0.50% POST SURVEY PERIOD 11.01.12 TO 31.03.12 988570535.29 18997127.54 1.92% TOTAL 01.04.11 TO 31.03.12 2767288863.18 27877299.31 1.01% 10. NO DOUBT, SUBSIDIARY RECORDS, BOOKS AND DOCUMEN TS WERE SEIZED DURING SURVEY OPERATION BUT THE SAME HAVE NO T BEEN TAKEN INTO ACCOUNT TO MAKE A FAIR ASSESSMENT OF THE TRADI NG RESULT RATHER THE ENTIRE GP RATE HAS BEEN ASSESSED ON GUESSWORK A ND ESTIMATED BASIS. GROSS PROFIT IS BASED UPON NUMEROUS FACTORS E.G. VOLATILITY IN THE MARKET, SLUMP IN RATES, UNFORESEEN CIRCUMSTANCE S, ETC. IN THESE CIRCUMSTANCES, TRADING RESULT OF THE ASSESSEE COMPA NY QUA IMMEDIATELY PRECEDING YEARS CANNOT BE LOST SIGHT OF WHEREIN THE ASSESSEE HAS ACHIEVED GROSS PROFIT OF 0.90%, 0.87% AND 0.96% ITA NO.4505/DEL./2016 ITA NO.3721/DEL./2016 6 DURING FY 2009-10, 2010-11 AND 2011-12 RETROSPECTIV ELY. THERE IS APPARENTLY NO MATERIAL ON THE FILE TO REACH AT THE CONCLUSION THAT DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE HAS ACHIEVED DOUBLE THE GROSS PROFIT. BECAUSE GROSS PROFIT CANNOT BE E STIMATED ON THE BASIS OF SOLE FACT THAT DURING THE PERIOD 11.01.201 2 TO 31.03.2012 I.E. WITHIN 2 MONTHS, THE ASSESSEE COMPANY ITSELF HAS SHOWN ITS GROSS PROFIT AT 1.92%. EVEN OTHERWISE, DURING THE LAST MONTHS OF THE YEAR, INVARIABLY BUSINESS USED TO SWELL DUE TO CLOSING OF THE YEAR. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSID ERED VIEW THAT FAIR AND REASONABLE GP RATE IN THE GIVEN CIRCUMSTAN CES SHOULD BE 1.40%. SO, CONSEQUENTLY INCOME OF THE ASSESSEE IS ORDERED TO BE ASSESSED BY TAKING THE GP RATE AT 1.40%. 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, APPEA L FILED BY THE REVENUE IS HEREBY DISMISSED WHEREAS THE APPEAL FILED BY THE ASSESSEE COMPANY IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF MARCH, 2018. SD/- SD/- (L.P. SAHU) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF MARCH, 2018 TS ITA NO.4505/DEL./2016 ITA NO.3721/DEL./2016 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-7, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.