Umed Singh Prop, Panipat V. ITO, Panipat

ITA 3813/DEL/2011

• Counselvise Citation: 381320114 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 12-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS MEETA SINGH SENIOR
• Assessee Lawyers: K L ANEJA
• Keywords: Business income; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI RAJPAL YADAV, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3813/DEL./2011 (ASSESSMENT YEAR : 2007-08) SHRI UMED SINGH, VS. ITO, WARD 4, PROP. OF M/S. GAREEMA FEED, PANIPAT. C/O ASHOK KUMAR SETHI, ADVOCATE 8, MAHAVIR COLONY, JATAL ROAD, PANIPAT 132 103. (PAN : AKOPS1279F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.L. ANEJA, ADVOCATE REVENUE BY : MRS. MEETA SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF CIT (APPEALS), KARNAL DATED 27.05.2011 FOR THE ASSESSMENT YEAR 2007-08. 2. THE RETURN OF INCOME WAS FILED ON 13.08.2007 DEC LARING TAXABLE INCOME AT RS.1,71,250/-. THE ASSESSEE, SHRI UMED SINGH, WAS RUNNING THREE CONCERNS DURING THE FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08. ONE M/S. GAREEMA FEEDS WHICH WAS TRADING AND MANUFACTURING OF POULTRY FEED AND THE BUSINESS WAS STARTED IN FINANCIAL YEAR 2004-05. THE SECOND IS M/S. VANS BR EEDING FARM AND HATCHERIES WHICH IS DOING THE BUSINESS OF HATCHERY AND BUSINESS STARTED DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THIRD, M/S. AJAY POULTRY FARM DOIN G THE BUSINESS OF POULTRY AND BUSINESS ITA NO.1038/DEL./2012 2 STARTED DURING THE FINANCIAL YEAR UNDER CONSIDERATI ON. THE ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF ESTIMATING GROSS PROFIT IN A LL THE THREE BUSINESSES AMOUNTING TO RS.4,46,056/-. CIT (A) HAS SUSTAINED THE SAME IN T OTO. THE OTHER ADDITION MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF AD HOC DISALLOW ANCE OF 20% OF EXPENSES DEBITED IN THE MANUFACTURING AND TRADING ACCOUNT AMOUNTING OF RS.23,18,016/-. THE CIT (A) HAS ALSO SUSTAINED THE ADDITION UP TO 20% ON THE AMOUNT OF R S.2,49,316/- AND GRANTED THE RELIEF BY EXCLUDING MANUFACTURING EXPENSES OF RS.4,63,406/- A ND FINANCIAL EXPENSES OF RS.6,05,294/-. THUS, CIT (A) SUSTAINED G.P. ADDITI ON IN TOTO AND AD HOC DISALLOWANCE OF EXPENSES PARTLY. NOW, THE ASSESSEE IS BEFORE US IN THE APPEAL BY TAKING THE FOLLOWING GROUNDS :- 1. THE WORTHY CIT (APPEAL) IS WRONG IN CONFIRMING THE ENHANCEMENT OF GROSS PROFIT RATE RESULTING IN THE ADDITION OF 4 46056/-, BEING MADE WITHOUT ANY BASIS, IN THE MOST ADHOC AND ARBITRARY MANNER, WITHOUT ANY ADVERSE MATERIAL PLACED ON RECORD. 2. WITHOUT PREJUDICE TO THE PLEADING UNDER GROUND N O.1, THE ADDITION OF RS.446056/- AS MADE BY WAY OF ENHANCEMENT OF GRO SS PROFIT RATE IS HIGHLY EXCESSIVE. 3. THE OBSERVATIONS OF THE A 0 WITH RESPECT TO INIT IATION OF PENALTY PROCEEDING ARE WRONG, UNFOUNDED AND UNJUSTIFIED. 4. THE CONFIRMING THE ADDITION OF RS.49863/- (20% O F 249316) OUT OF ADDITION OF RS.463603.00 (20% OF 2318015/-) MADE BY AO, IS LEGALLY WRONG. IT WAS JUST AN ADHOC AND ARBITRARY ADDITION, MADE WITHOUT ANY JUSTIFICATION AND WITHOUT ANY MATERIAL PLACED ON RE CORD. HENCE THE WHOLE ADDITIONS IS LIABLE TO BE DELETED. 5. THE APPELLANT CRAVES TO AMEND OR RAISE ANY OTHER GROUND AT THE TIME OR BEFORE THE DATE OF HEARING. 3. GROUND NOS.1 & 2 ARE RELATED TO ADDITION MADE ON ACCOUNT OF ESTIMATING ON ALL THREE BUSINESSES GROSS PROFIT OF RS.4,46,056/-. TH E ASSESSEE DECLARED THE FOLLOWING TURNOVER AND GROSS PROFITS IN ALL THE THREE BUSINES SES AS UNDER :- ITA NO.1038/DEL./2012 3 M/S. GAREEMA FEEDS M/S. VANS BREEDING M/S. AJAY POULTRY TOTAL SALES 12658991/- 3719904/- 3546810/- 19925205 GROSS PROFIT 961771/- 695787/- 615627/- 2273085/- GP RATE 7.60 18.70 17.36 11.40 THE CIT (A) HAS CONFIRMED THE ADDITION BY ADOPTING 10% GROSS PROFIT RATE IN THE CASE OF M/S. GAREEMA FEEDS INSTEAD OF 7.60%, 20% GROSS PROF IT RATE IN THE CASE OF M/S. VANS BREEDING FARM & HATCHERIES INSTEAD OF 18.70% AND 20 % GROSS PROFIT RATE IN THE CASE OF M/S. AJAY POULTRY FARM INSTEAD OF 17.36%. THE ADDI TION TOWARDS THE GROSS PROFIT IN ADDITION TO THE DECLARED G.P. BY THE ASSESSEE COMES TO RS.3,04,128/- IN THE CASE OF M/S. GAREEMA FEEDS, RS.48,193/- IN THE CASE OF M/S. VANS BREEDING FARM & HATCHERIES AND RS.93,735/- IN THE CASE OF M/S. AJAY POULTRY FARM T OTALING TO RS.4,46,056/-. 4. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD . AR SUBMITTED THAT THE ENHANCEMENT TO GROSS PROFIT AT SUCH A LEVEL IS EXCE SSIVE. IN THE CASE OF M/S. VANS BREEDING FARM & HATCHERIES AND M/S. AJAY POULTRY FARM, THE G ROSS PROFIT IN THE SUBSEQUENT YEAR WAS LESSER THAN THE DECLARED BY THE ASSESSEE AND NO ADDITION HAS BEEN MADE EVEN WHEN THE ORDER U/S 143(3) WAS MADE FOR THE ASSESSMENT YEAR 2 009-10. A COPY OF THE ORDER WAS MADE AVAILABLE DURING THE HEARING OF THE CASE WHERE IN A LUMP SUM ADDITION OF RS.1 LAC HAS BEEN MADE FOR WANT OF VERIFICATION AND PERSONAL ACC OUNT. THE LD. AR SUBMITTED THAT ORDER OF CIT (A) DESERVES TO BE SET ASIDE AS NO COMPARABL E EXAMPLE IS GIVEN BY ASSESSING OFFICER. ON THE OTHER HAND, THE LD. DR RELIED ON T HE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE GROSS PROFIT IN THE CASE OF M/S. GAREEMA FEEDS DECLARED BY THE ASSESSEE IS 7.6%. TH E GROSS PROFIT IN THE IMMEDIATELY PRECEDING YEAR IN THIS BUSINESS WAS 11.42%. THE GR OSS PROFIT RATE IN THE SUCCEEDING YEAR, I.E. ASSESSMENT YEAR 2008-09 WAS 17.48%. ASSESSEE HAD FAILED TO EXPLAIN THE REASONS FOR SUCH GP RATE IN THIS YEAR IN COMPARISON TO PRECEDIN G AND SUCCEEDING YEARS. AFTER ITA NO.1038/DEL./2012 4 CONSIDERING ALL THESE ASPECTS AND FACTS OF THE CASE , WE HOLD THAT THE ESTIMATE OF 10% G.P. IN THIS BUSINESS BY THE ASSESSING OFFICER AND SUSTAINE D BY THE CIT (A) IS JUSTIFIED. THEREFORE, WE SUSTAIN THE ESTIMATION OF GROSS PROFIT @ 10% IN THE BUSINESS OF M/S. GAREEMA FEEDS AT THE TURNOVER OF RS.1,26,58,991/-. IN THE BUSINESS OF M/S. VANS BREEDING FARM & HATCHERIES, WE FIND THAT THE ASSESSEE HAS DECLARED GROSS PROFIT RATE @ 18.70%. THIS WAS THE FIRST YEAR OF THE BUSINESS. IN THE IMMEDIATE S UCCEEDING ASSESSMENT YEAR 2008-09, THE GROSS PROFIT RATE WAS 11.70%. IN THE ASSESSMENT YE AR 2009-10, THE GP RATE WAS 16.93%. IN THE ASSESSMENT YEAR 2009-10, THE ASSESSING OFFIC ER HAS ALMOST ACCEPTED THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE EXCEPT MAKING AN AD HOC ADDITION OF RS.1 LAC IN ALL THREE BUSINESSES ON ACCOUNT OF VERIFICATION OF EXPE NSES AND PERSONAL ACCOUNT. SIMILARLY, IN THE CASE OF M/S. AJAY POULTRY FARM, WE FIND THAT TH E GROSS PROFIT RATE DECLARED BY THE ASSESSEE WAS 17.36%. THIS WAS THE FIRST YEAR OF TH E BUSINESS. IN THE IMMEDIATE SUCCEEDING YEAR 2008-09, THE GROSS PROFIT RATE DECLARED WAS 17 .20%. IN ASSESSMENT YEAR 2009-10, THE G.P. RATE WAS 11.18%. THUS, IN BOTH YEARS, THE GP WAS LOWER THAN THE YEAR UNDER CONSIDERATION. THE GROSS PROFIT RATE HAS BEEN ALMO ST ACCEPTED IN ASSESSMENT YEAR 2009-10 EXCEPT MAKING AN ADDITION OF RS.1 LAC, AS STATED AB OVE. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE HOLD THAT THE RE VENUE AUTHORITIES WERE NOT JUSTIFIED IN ENHANCING THE GROSS PROFIT RATE FOR THESE TWO BUSIN ESSES WHERE THE GROSS PROFIT RATE DECLARED WAS @ 18.70% IN THE CASE OF M/S. VANS BREEDING FARM & HATCHERIES AND 17.36% IN THE CASE OF M/S. AJAY POULTRY FARM. IN VIEW OF THESE F ACTS, WE PARTLY ALLOW THESE GROUNDS OF ASSESSEES APPEAL AS STATED ABOVE. 6. GROUND NO.3 IS AGAINST THE INITIATION OF PENALTY PROCEEDINGS. IN OUR CONSIDERED VIEW, THIS GROUND IS PREMATURE AND DOES NOT REQUIRE ADJUDICATION AT THIS STAGE. 7. GROUND NO.4 IN THE ASSESSEES APPEAL IS AGAINST THE SUSTAINING OF THE ADDITION OF 20% ON THE EXPENSES OF RS.2,49316/-. AFTER HEARING BOTH THE SIDES, WE HOLD THAT ONCE WE ITA NO.1038/DEL./2012 5 HAVE SUSTAINED THE ADDITION ON THE ENHANCEMENT OF T HE GROSS PROFIT RATE, IT WOULD NOT BE APPROPRIATE TO SUSTAIN AD HOC ADDITION FROM THE EXP ENSES FOR WANT OF VERIFICATION. THEREFORE, WE DELETION THIS ADDITION AND THIS GROUN D IS ALLOWED. 8. GROUND NO.5 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2012. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF SEPTEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), KARNAL. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.