ITO, UDAIPUR V. Shri Devendra Nagda, UDAIPUR

ITA 384/JODH/2010

• Counselvise Citation: 38423314 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R H GOHEL
• Assessee Lawyers: SHARAD KOTHARI
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NO. 384/JU/2010 ASSESSMENT YEARS: 2007-08 PAN: AANPN 2874 L THE ITO VS. SHRI DEVENDRA NAGDA WARD- 2(1) MAIN ROAD, PRATAP NAGAR UDAIPUR UDAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI R.H. GOHEL ASSESSEE BY : SHRI SHARAD KOTHARI DATE OF HEARING: 09-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A), UDAIPUR DATED 12-03-2010 FOR THE ASSESSMENT YEAR 2007-08. 2.1 THE FIRST GROUND OF REVENUE IS THAT THE LD. CI T(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS. 8,64,540/- BY APPLYING THE PROVISIONS OF SECTION 145 OF THE ACT. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT SHORTAGE OF PERCENTAGE OVER SALES IS 0.3436% AS COMPARED TO 0.3 071% OF THE IMMEDIATELY PRECEDING YEAR. ACCORDING TO THE AO, THE ASSESSEE HAS CLAIMED SHORTAGE WITHOUT ANY BASIS OR THE CRITERIA OF EVAPORATION OF PETROL AND DIESEL. THE A O WAS OF THE OPINION THAT THE ASSESSEE MIGHT NOT HAVE ACCOUNTED OF THE CASH SALES IN THE R EGULAR BOOKS OF ACCOUNT. THE AO ACCORDINGLY HELD THAT SALES ARE NOT VERIFIABLE. THE AO APPLIED THE GROSS PROFIT RATE OF 2 1.59% BY CONSIDERING THE SAME AS GROSS PROFIT RATE OF IMMEDIATELY PRECEDING YEAR AND MADE THE TRADING ADDITION OF RS. 8,64,540/-. 2.3 BEFORE THE LD.CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED QUANTITATIVE DETAILS AND THESE ARE MENTIONED IN THE AUDIT REPORT. THE QUANTITATIVE DETAILS ARE SUPPORTED BY THE DAY TO DAY STOCK REGISTER WHIC H WAS PRODUCED BEFORE THE AO DURING THE COURSE OF HEARING. THE AO HAS NOT POINTED OUT A NY SPECIFIC DEFECT. IN THE IMMEDIATELY PRECEDING YEAR, THERE WERE SHORTAGES AND PROVISIONS OF SECTION 145(3) WERE NOT INVOKED. DURING THE YEAR UNDER CONSIDERATION , THE GROSS PRO FIT RATE IS 1.20% AS COMPARED TO 1.485% OF THE IMMEDIATELY PRECEDING YEAR. IT WAS FU RTHER SUBMITTED THAT THE AO HAS WRONGLY APPLIED THE GROSS PROFIT RATE OF 1.59% THOU GH THE INTENTION WAS TO APPLY THE GROSS PROFIT RATE OF EARLIER YEAR AND THE GROSS PROFIT RA TE OF EARLIER YEAR WAS AT 1.485%.THE LD.CIT(A) HAS DELETED THE ADDITION BECAUSE IN THE P RECEDING YEAR TRADING RESULTS WERE ACCEPTED. THE ASSESSEE HAS MAINTAINED THE QUANTITAT IVE DETAILS. 2.4 WE HAVE HEARD BOTH THE PARTIES. WE HAVE CONSIDE RED THE ORDER OF THE JODHPUR BENCH IN THE CASE OF MARWAR PETROL SERVICE VS ITO, 69 TTJ 772 IN WHICH IT HAS BEEN HELD THAT TRADING RESULTS CANNOT BE REJECTED ON THE GROU ND OF SHORTAGE OF 1% IN PETROLEUM PRODUCTS. MOREOVER, THE ASSESSEE HAS MAINTAINED THE DAY TO DAY STOCK REGISTER AND ADDITION CANNOT BE MAINTAINED MADE MERELY ON THE BA SIS OF SURMISES AND CONJECTURES. THE LD.CIT(A) WAS THEREFORE, JUSTIFIED IN DELETING THE TRADING ADDITION. 3.1 THE SECOND GROUND OF REVENUE IS THAT THE LD. C IT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.3.80 LACS MADE BY THE AO ON ACC OUNT OF EX-GRATIA. 3.2 THE AO NOTICED THAT THE ASSESSEE HAS DEBITED TH E SALES AND ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS. 16,99,200/- AS AGAINS T RS. 12,28,600/- IN THE IMMEDIATELY 3 PRECEDING YEAR. THE PERUSAL OF THESE DETAILS INDICA TE THAT THE ASSESSEE HAS DEBITED THE EX- GRATIA TO THE EXTENT OF RS. 7.80 LACS IN THE IMMEDI ATELY PRECEDING YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF THE EXPENSES AND TO JUSTIFY THE CLAIM. ACCORDING TO THE AO, THE ASSESSEE HAS NOT FURNISHED COGENT EXPLANATION F OR THE PAYMENT OF SUCH EX-GRATIA. HE HAS GIVEN THE LIST OF 15 EMPLOYEES TO WHOM EX-GRATI A AMOUNT HAS BEEN PAID BUT THE ADDRESSES OF SUCH EMPLOYEES WERE NOT GIVEN. THE AO ACCORDINGLY TREATED THE EX-GRATIA AMOUNT ALLOWABLE TO THE EXTENT OF RS. 4.00 LACS AND BALANCE OF RS. 3.80 LACS WAS ADDED. 3.3 BEFORE THE LD.CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE IN HIS REPLY TO THE AO MENTIONED THAT SUCH PAYMENT IS MADE FOR GOOD WORK A ND OVERTIME TO THE EMPLOYEES. THE PAYMENTS WERE MADE TO THE EMPLOYEES AD THEREFORE, T HERE WAS NO NEED OF MENTIONING ADDRESSES OF SUCH EMPLOYEES IN THE VOUCHERS. THE SI GNATURES OF THE EMPLOYEES WERE TAKEN ON VOUCHERS. BEFORE THE LD.CIT(A), THE ASSESSEE PRO DUCED THE PHOTOSTAT COPY OF VOUCHERS AS WELL AS RELEVANT CASH BOOK PAGES. THE LD.CIT(A) DELETED THE ADDITION AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. 3.4 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HA S PAID EX-GRATIA PAYMENT TO 15 EMPLOYEES TO THE EXTENT OF RS. 7.80 LACS. THUS EACH EMPLOYEE ON AN AVERAGE GOT MORE THAN RS. 50,000/-. SUCH PAYMENT IS ON ACCOUNT OF SE RVICES RENDERED BY THE EMPLOYEES TO THE EMPLOYER. THE AO HAS NOT BEEN ALE TO REBUT THE EVIDENCE THAT PAYMENTS WERE NOT MADE. THE AO COULD HAVE MADE ENQUIRIES FROM THE EMP LOYEES OR COULD HAVE ASCERTAINED AS TO WHETHER THE ASSESSEE HAS DEDUCTED THE TDS ON THE SALARIES PAID TO THE EMPLOYEES INCLUDING THE EX-GRATIA PAYMENT. THE BUSINESS DECIS IONS ARE TO BE TAKEN BY THE EMPLOYER. THE REVENUE AUTHORITY CANNOT SIT OVER THE JUDGEMENT OF THE BUSINESSMAN, IN CASE SUCH 4 DECISION IS FOR THE PURPOSE OF THE BUSINESS. WE THE REFORE, HOLD THAT THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. 4.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 6-12-2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 16/12/2011 MISHRA COPY TO: 1. THE ITO, WARD- 2 (1), UDAIPUR 2. SHRI DEVENDRA NAGDA, UDAIPUR 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO.384//JU/10) A.R.. ITAT: JODHPUR