SHRI NARESH KUMAR, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 389/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1200 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 389/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 SHRI NARESH KUMAR MANGAL ARPAN VILLA NO. 6, ISKON TEMPLE, RAMPURA ROAD, JAIPUR (RAJ). CUKE VS. THE ITO, WARD-7(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: BAFPK 3864 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI. J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 06/09/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT :10/09/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-3, JAIPUR DATED 23.02.2018 FOR THE ASSESSMEN T YEAR 2013-14 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL: 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) HAS ERRED SERIOUSLY ON FACTS IN SUSTAINING T HE ACTION OF THE LD. AO IN TAKING THE TURNOVER OF THE APPELLANT AS P ER FORM 26AS IN ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 2 PLACE OF THAT RECORDED IN ACCOUNT STATEMENT ISSUED BY THE SUPPLIER. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD CIT(A) HAS ERRED ON FACTS IN SUSTAINING THE ACTION OF THE LD. AO IN ESTIMATING THE PROFIT OF RS. 95,174/- (AS AGAINST R S. 1,05,671/- ESTIMATED BY THE LD. AO) ALLEGED TO HAVE BEEN EARNE D ON VARIATION IN TURNOVER AS PER FORM 26AS AND THAT DEC LARED IN RETURN. 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD CIT(A) HAS ERRED IN APPLYING NP RATE OF 13.51% (AS AGAINST NP RATE OF 15% APPLIED BY LD. AO) FOR ESTIMATING THE I NCOME OF THE APPELLANT BY IGNORING THE FACTS PRODUCED BEFORE HIM . 2. IN RESPECT OF GROUNDS NOS. 1 AND 2, BRIEFLY THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAD DECLARED PURCHASES OF RS. 2,27,36,544.55 AND SALE O F RS. 2,59,70,333/- AND ON SUCH SALES, HE HAS DISCLOSED G P OF RS. 32,15,638.45 (I.E. 12.38%). THE AO OBSERVED THA T IN FORM 26AS, THE SUPPLIER OF LIQUOR HAS COLLECTED TAX AT S OURCE ON PURCHASES OF RS. 2,34,41,016/- AS AGAINST WHICH THE APPELLANT HAS DECLARED PURCHASES OF RS. 2,27,36,544 ONLY AND HENC E, HE HAS ALLEGED SUPPRESSION IN PURCHASES OF RS. 7,04,472/- AND HE HAS CONSIDERED THAT THE APPELLANT HAS NOT DECLARED SUCH PURCHASES AND HAD SOLD GOODS IN UNACCOUNTED WAY AND ON SUCH PURCH ASES, HE HAS APPLIED A PROFIT RATE OF 15% AND HAS MADE ADDITION OF RS. 1,05,671/- THEREON. THE AO HAS ALSO ALLEGED THA T ANOTHER DEFECT IN THE BOOKS IS THAT NO SALE BILLS ARE ISSUE D AND HENCE SALES QUANTUM IS UNVERIFIABLE AND HE HAS REJECTED B OOKS OF ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 3 ACCOUNT U/S 145(3) AND HAS ESTIMATED GP RATE OF THE APPELLANT @ 15% AND ACCORDINGLY HAS MADE ADDITION OF 2.62% ON D ECLARED SALES OF RS. 2,59,70,333/- RESULTING INTO AN ADDITI ON OF RS. 6,79,912/-. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS GIVEN PARTIAL RELIEF TO THE ASSESSEE AND THE RELEVANT FINDINGS ARE CONTAINED AT PARA 5.3 WHICH IS REPRODUCED AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFOR E ME. I FIND THAT THE TOTAL PURCHASE AS PER 26AS ARE 2,33,86,546/- WH ICH IS INDEPENDENT SOURCE OF THE PURCHASES, THIS FACT IS A LSO ACCEPTED BY THE A/R OF THE APPELLANT IN HIS SUBMISSION AND THE A/R OF THE APPELLANT FAILED TO RECONCILE THE FIGURE WITH THE P URCHASE SHOWN IN THE BOOKS OF ACCOUNT. THE A/R OF THE APPELLANT SUBM ITTED THAT M/S RSBCL HAS FILED SOME INCORRECT FIGURE IN ITS RETURN OF TCS. THIS ARGUMENT IS NOT BELIEVABLE. THIS IS THE DUTY OF THE APPELLANT TO CORRECT THE 26AS AND TAKE THE CORRECT FIGURE IF THE RE IS MISMATCH BUT APPELLANT FAILED TO PROVIDE IT. THEREFORE I AM THE OPINION THAT THE APPELLANT NOT SHOWN THE GROSS PROFIT ON THE PUR CHASES OF RS. 7,04,472/-. THE GROSS PROFIT RATE IN THE GROUND NO. 2 TAKEN BY ME @ 13.51%. THUS THE UNDISCLOSED GROSS PROFIT COMES T O RS. 95,174/-, HENCE I CONFIRM THE ADDITION OF RS. 95,17 4/- AND BALANCE AMOUNT OF RS. 10,497/- IS DELETED. THIS GROUND IS P ARTLY ALLOWED. 4. DURING THE COURSE OF HEARING, THE LD. AR HAS SUB MITTED THAT FOR FRAMING THE ASSESSMENT, THE AO ACCEPTED THE TURNOVE R AS PER ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 4 ENTRIES OF TCS APPEARING IN FORM 26AS ONLY. HE FORG OT TO TAKE INTO CONSIDERATION THAT THE ENTRIES IN FORM 26AS ARE INC ORPORATED AS PER THE DETAILS PROVIDED BY THE DEDUCTOR OF THE TAX OR COLLECTOR OF THE TAX. IN THIS CASE, M/S. RAJASTHAN STATE BEVERAG ES CORP. LTD. (A GOVT. OF RAJASTHAN ENTERPRISE) HAD COLLECTED TAX @ 1% U/S 206C OF THE INCOME TAX ACT, 1961. THE RESPONSIBILITY TO FIL E PERIODICAL RETURNS OF SUCH TCS WAS ALSO ON SAID COLLECTOR AND HENCE THE APPELLANT DID NOT HAVE ANY CONTROL OVER SUCH RETURN S. THE SAID CORPORATION PROVIDED WRONG DETAILS IN FORM 26AS WHI CH IS VERIFIABLE FROM THE FOLLOWING :- A. IN THE ASSESSMENT ORDER, THE AO HAS MENTIONED AB OUT DECLARING TOTAL PURCHASES OF RS. 2,34,41,016/- WHICH SEEMS TO BE THE FIGURE APPEARING AT THE TIME OF ASSESSMENT PROCEEDINGS WHE REAS AS PER FORM 26AS DOWNLOADED ON 04.05.2018, THE SAID FIGURE IS COMING TO THE TUNE OF RS. 2,33,86,546/- MEANING THEREBY THAT DURING THIS INTERVENING PERIOD, SOME WRONG INPUTS WERE RECTIFIE D BY THE SAID CORPORATION. B. AS PER THE STATEMENT OF PURCHASES PROVIDED BY TH E ABOVE NAMED CORPORATION IN THE SALES COLUMN TOTAL AMOUNT OF SAL ES TO THE APPELLANT DURING THE YEAR IS COMING TO THE TUNE OF RS. 2,29,70,411/- WHICH IS SUMMATION OF AMOUNT OF SALES AND 1% TCS. IF WE GROSS UP THE FIGURE, THE SALES FIGURE COMES T O RS. 2,27,42,982/- WHICH IS VERY CLOSE TO DECLARED PURCH ASES OF RS. 2,27,36,544/-. ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 5 THEREFORE, THE ALLEGATION OF SUPPRESSION IN PURCHAS E IS WRONG AND UNJUSTIFIED AND DESERVES TO BE QUASHED. 5. THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDI NGS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE ARE VARIATI ONS IN THE PURCHASE AS SHOWN BY THE ASSESSEE AND AS REPORTED IN FORM 26AS AND THE STATEMENT OF THE SUPPLIER SO FURNISHED BY THE ASSES SEE. GIVEN THAT THERE IS NO FINDING OF THE LD CIT(A) REGARDING THE AMENDED FORM 26AS AND STATEMENT OF THE SUPPLIER SO SUBMITTED BY THE A SSESSEE, WE HEREBY SET-ASIDE THE MATTER TO THE FILE OF THE LD CIT(A) W HO SHALL EXAMINE THE SAME AFTER CALLING THE REPORT FROM THE AO AND THE S UPPLIER REGARDING EXACT QUANTUM OF PURCHASES SO MADE BY THE ASSESSEE DURING THE FINANCIAL YEAR RELEVANT TO IMPUNGED ASSESSMENT YEAR . IN THE RESULT, THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 7. REGARDING GROUND NO. 3, THE LD. AR HAS SUBMITTED THAT THE ID. CIT (A) HAS APPLIED A GP RATE OF 13.51% FOR DETERMI NING INCOME OF THE APPELLANT AS AGAINST A RATE OF 15% APPLIED B Y THE AO. IT WAS SUBMITTED THAT IMMEDIATELY PRECEDING YEAR WAS T HE FIRST YEAR OF BUSINESS OF THE APPELLANT WHEREIN HE HAD DECLARE D A SALES OF RS. 1,74,83,759/- ON WHICH GP RATE DECLARED WAS @ 1 4.63% WHEREAS DURING THE YEAR UNDER CONSIDERATION, THE AP PELLANT HAS DECLARED A TURNOVER OF RS. 2,59,70,333/- YIELDING A GROWTH OF 48.54% OVER LAST YEAR AND ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 6 ON SUCH TURNOVER, HE HAS DECLARED A GP RATE OF 12.3 8% WHICH IS ABSOLUTELY JUSTIFIED CONSIDERING:- A. AFTER 1997, THE STATE GOVERNMENT HAS STARTED AWA RDING CONTRACTS FOR LIQUOR SHOP WISE AND NOT DISTRICT WISE. IN EARL IER SET UP THE DISTRICT LIQUOR CONTRACTOR USED TO ENJOY THE BENEFI T OF MONOPOLY WHEREAS IN SHOP WISE CONTRACTORS THERE ARE LARGE NU MBER OF LIQUOR CONTRACTORS IN A DISTRICT WHO MEET WITH THE TOUGH C OMPETITION AND IN SUCH PERFECT COMPETITION SET UP THE GOP MARGIN IS B OUND TO BE LOW AND IS SHRINKING YEAR BY YEAR. B. AS PER CURRENT POLICY OF THE GOVERNMENT, THE CON TRACTORS ARE BOUND TO PURCHASE LIQUOR ONLY FROM GOVERNMENT COMPANIES/CORPORATIONS WHEREIN THE CONTRACTOR DO NO T HAVE ANY RIGHT TO MAKE BARGAINS WHEREAS IN EARLIER SET UP DU E TO FREEDOM OF BUYING LIQUOR FROM ANY PRIVATE COMPANY OR ELSEWHERE THE CONTRACTOR USED TO ENJOY BENEFITS OF AVAILING VARIO US PROMOTION SCHEMES. THEREFORE THE GP RATE IS BOUND TO COME DOW N. C. EVEN IN A SMALL AREA DUE TO LARGE NUMBER OF SHOP S THE CUSTOMER GETS THE BENEFIT OF CHOOSING THAT SHOP WHEREFROM HE CAN BUY LIQUOR AT CHEAPER PRICE DUE TO WHICH THE CONTRACTOR IS BOU ND TO SELL THE GOODS AT LESSER THAN MRP WRITTEN ON THE PRODUCT. IT IS THEREFORE, HUMBLY REQUESTED THAT THE DECLARED GP RATE OF 12.38% IS ABSOLUTELY JUSTIFIED AND MAY KINDLY BE AC CEPTED AND THE ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 7 ADDITION OF RS. 6,72,912/- (REDUCED BY THE LD. CIT( A) TO RS. 3,12,954/-) MAY PLEASE BE DELETED. 8. IN THIS REGARD, THE RELEVANT FINDINGS OF THE LD CIT(A) ARE CONTAINED AT PARA 6.3 WHICH IS REPRODUCED AS UNDER: - 6.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFOR E ME. I FIND THAT ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUN TS ON THE BASIS OF THAT THE PURCHASES ARE NOT PROPERLY SHOWN AND ALL T HE SALES ARE NOT UNVARIABLE, THE EXPENSES ARE NOT PROPERLY VOUCHED. THE A/R OF THE APPELLANT FAILED TO FILE ANY SUBMISSION WHICH ESTAB LISHED THAT THE SALES AND EXPENSES ARE PROPERLY SHOWN AND PURCHASES ARE NOT SUPPRESSED. THEREFORE I AM THE VIEW THAT THE RESULT SHOWN BY TH E APPELLANT IN THE BOOKS OF ACCOUNTS ARE NOT CORRECT AND TRUE. HEN CE I UPHELD THE ACTION OF THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNTS BY APPLYING THE PROVISION U/S 145(3) OF THE I.T. ACT. THE NEXT ISSUE IS THE ESTIMATION OF THE GROSS PROFI T RATES. THE ASSESSING OFFICER ESTIMATION THE GROSS PROFIT RATE @ 15% WITHOUT ANY BASIS. THE A/R OF THE APPELLANT SUBMITTED THAT ONLY VIOLATION U/S 145(3) DOES NOT NECESSARILY RESULT INTO SOME TRADIN G ADDITION AS HELD BY THE RAJASTHAN HIGH COURT AND HE ALSO RELIED UPON THE CASE LAW OF HONOURABLE SUPREME COURT IN THE CASE OF MALANI RAMJ IVAN JAGANNATH V/S ACIT (316 ITR 120 AND CIT V/S GOTAN LIME KHANIJ UDHYOG (256 ITR 243) BUT THESE CASE LAWS ARE NOT APPLICABLE IN THIS CASE BECAUSE IN ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 8 THIS CASE THE PURCHASES ARE NOT SHOWN PROPERLY SALE S AND EXPENSES ARE NOT FULLY VERIFIABLE . FURTHER THE A/R SUBMITTED THAT THE GROSS PROFIT OF LAST YEAR IS 14.63% AND GROSS PROFIT IN PRESENT YEAR IS 12.38%. THE AVERAGE OF THE GROSS PROFIT OF TWO YEAR COMES 13.51%. THE HONOURAB LE RAJASTHAN HIGH COURT HELD IN VARIOUS CASES THAT PAST HISTORY IS TH E BEST METHOD FOR ESTIMATION OF GROSS PROFIT. THEREFORE FOLLOWING THE GUIDELINES ISSUED BY THE HO NOURABLE RAJASTHAN HIGH COURT I ADOPT THE GROSS PROFIT RATE @ 13.51%. THUS THE GROSS PROFIT COMES RS. 35,28,592/-. THE APPELLA NT SHOWN GROSS PROFIT RS. 32,15,638/-. THUS THE ADDITION COMES OF RS. 3,12,954/- . ACCORDINGLY I CONFIRM THE ADDITION OF RS. 3,12,954/ - AND BALANCE AMOUNT OF RS. 3,66,958/- IS DELETED. THIS GROUND IS PARTLY ALLOWED. 9. THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDI NGS OF THE LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER CONSID ERATION RELATES TO ESTIMATION OF GROSS PROFIT RATE ON THE DECLARED TUR NOVER OF THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LIQUOR B USINESS WHERE BOTH PURCHASES AND THE SALES AND THE PRICES THEREOF ARE REGULATED BY THE GOVERNMENT. GIVEN THE NATURE OF BUSINESS AND THE S AME LIQUOR CONTRACT RUNNING OVER THE LAST YEAR AND THE YEAR UNDER CONSI DERATION, WE DONOT FIND THE HYPOTHESIS OF INCREASE IN TURNOVER OF THE ASSESSEE OVER THE PAST ITA NO. 389/JP/2018 SHRI NARESH KUMAR VS. ITO 9 YEAR WHICH HAS RESULTED IN REDUCED GROSS PROFIT DUR ING THE YEAR ACCEPTABLE. THE ASSESSEE HAS DECLARED G.P OF 12.38 % WHICH HAS BEEN INCREASED BY THE AO AT 15% AND SUBSEQUENTLY REDUCED TO 13.51% BY THE LD CIT(A). GIVEN THAT IN THE EARLIER YEAR, THE ASSESSEE HIMSELF HAS DECLARED A G.P RATE OF 14.63%, WE FIND THAT THE LD CIT(A) HAS BEEN REASONABLE IN ESTIMATING THE CURRENT YEAR G.P RATE AT 13.51%. IN THE RESULT, THE GROUND TAKEN BY THE ASSESSEE IS HEREBY DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10/09/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-10/09/2018. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI NARESH KUMAR, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD- 7(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 389/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR