PRAVEEN KUMAR SHREEMAL, Jaipur V. ITO, Jaipur

ITA 39/JPR/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9690 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DR DHK
• Assessee Lawyers: N S VYAS
• Keywords: Rejection of books of accounts; Depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 39/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 SHRI PRAVEEN KUMAR SHREEMAL F-17/A, MALVIYA INDUSTRIAL AREA FOREST CHOWKY, JAIPUR CUKE VS. THE ITO WARD- 4(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AJQPS 3351 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI N.S. VYAS, CA JKTLO DH VKSJ LS@ REVENUE BY: SMT. POONAM RAI, DCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/03/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 03 /03/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)-2 , JAIPUR DATED 23-11-2016 FOR THE ASSES SMENT YEAR 2012-13 RAISING FOLLOWING GROUNDS OF APPEAL. 1. THAT THE AUTHORITIES BELOW ERRED IN INVOKING THE PROVISION OF SECTION 145(3) OF I.T. ACT, 1961 THERE BY REJECTING THE BOOKS OF ACCOUNT AND SUSTAINING THE T RADING ADDITION AMOUNTING TO RS. 2.00 LACS. ITA NO.39/JP/2017 SHRI PRAVEEN KUMAR SHREEMAL VS. ITO,WARD- 4(1), JAI PUR 2 2. THAT THE AUTHORITIES BELOW FURTHER ERRED IN DISALLOWING OUT OF TELEPHONE EXPENSES, CONVEYANCE EXPENSES, REPAIRS AND MAINT. EXPENSES, CAR INSURANC E AND DEPRECIATION ON CAR AMOUNTING TO RS. 27,585/- BEING THE 10% OF THE TOTAL CLAIM. 2.1 APROPOS GROUND NO. 1 OF THE, THE FACTS AS EMERG ES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 2.2 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. AS NOTED BY THE ASSESSING OFFICER DURING THE YEAR THE GROSS PROFIT HAS BEEN SHOWN AT 10.82% COMPARED TO 10.80% IN THE PREVIOUS YEAR. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER OR THE QUANTITATI VE AND QUALITATIVE DETAILS OF OPENING AND CLOSING STOCK. F URTHER, IN THE TAX AUDIT REPORT ALSO THE AUDITORS HAD COMMENTE D THAT THE STOCK REGISTER HAD NOT BEEN MAINTAINED. FURTHER, TH E ASSESSMENT HISTORY OF THE ASSESSEE SHOWS THAT A HIG HER GROSS PROFIT RATE WAS APPLIED BY THE ASSESSING OFFICER AN D SUSTAINED BY THE APPELLATE AUTHORITIES INCLUDING TH E HON'BLE ITAT IN ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10 AS DISCUSSED IN DETAIL IN THE ORDER OF THE ASSESSING O FFICER. THUS THE TRADING RESULTS OF THE ASSESSEE HAD NOT BE EN ACCEPTED IN THE PAST ALSO AND THE BOOKS OF ACCOUNT HAD BEEN REJECTED U/S 145(3) AND THE SAME HAD BEEN UPHELD IN APPEAL. BASED ON THE ABOVE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE I.T. ACT, 1961 AND MA DE A LUMP SUM TRADING ADDITION OF RS. 3,00,000/- FOR REASONS DISCUSSED. IN THE PRESENT PROCEEDINGS, THE AUTHORISED REPRESEN TATIVE SUBMITTED THAT SINCE IN THE CURRENT YEAR THE PROFIT PERCENTAGE IS BETTER THAN THE PREVIOUS YEAR, NO TRADING ADDITI ON SHOULD BE MADE. AS ALREADY DISCUSSED, THE ASSESSEE IS NOT MAI NTAINING PROPER STOCK RECORDS OR REGISTER DUE TO WHICH THE B OOKS OF ACCOUNT HAD BEEN REJECTED BY THE ASSESSING OFFICER. FURTHER, THE ASSESSEE'S HISTORY ITSELF SHOWS THAT THE BOOK R ESULTS ARE NOT PROPER AND ADDITIONS HAVE BEEN MADE IN THE PAST THEREFORE, EVEN THOUGH A SLIGHT INCREASE IN G.P. HA S BEEN ITA NO.39/JP/2017 SHRI PRAVEEN KUMAR SHREEMAL VS. ITO,WARD- 4(1), JAI PUR 3 SHOWN IN THE CURRENT YEAR, THE REJECTION OF BOOKS O F ACCOUNT U/S 145(3) IS UPHELD. THE TRADING ADDITION IS SUSTA INED AT RS. 2,00,000/- INSTEAD OF RS. 3,00,000/-. THE GROUND OF APPEAL IS PARTLY ALLOWED. 2.2 APROPOS GROUND NO. 2 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 3.2 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT. THE DISALLOWANCE HAS BEEN MADE AS THE EXPENDITURE WERE NOT FULLY VOUCHED AS WELL AS THE PERSONAL ELEMENT. THE DISALLOWANCE IS SUSTAINED AT 10% OF THE EXPENDITURE INSTEAD OF 20%. THE GROUND OF APPEAL IS PARTLY ALLOWED. 2.3 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AS REGARDS GROUND NO. 1 OF THE ASSESSEE, BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FR OM BUSINESS OF TRADING OF TIMBER & PLYWOOD. THE TRADING RESULTS SHOWN BY T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND PRECEDING YEAR IS AS U NDER. A.Y. SALES G.P. (RS.) G.P. RATE (%) 2012-12 23709913 2565918 10.82% 2011-12 21698393 2342751 10.80% DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED THE STOCK REGISTER OR T HE QUANTITATIVE DETAILS OF OPENING AND CLOSING STOCK. HE ALSO OBSERVED THAT THE IN THE TAX AUDIT REPORT IN COLUMN 28(A) THE AUDITORS HAS COMMENTED T HAT NOT MAINTAINED LOOKING TO THE SIZE AND NATURE OF THE BU SINESS, INVENTORY OF ITA NO.39/JP/2017 SHRI PRAVEEN KUMAR SHREEMAL VS. ITO,WARD- 4(1), JAI PUR 4 CLOSING STOCK TAKEN BY PROPRIETOR AT THE END OF THE FINANCIAL YEAR. THE AO ASKED THE REASON FROM THE ASSESSEE FOR NOT MAINT AINING THE BOOKS OF ACCOUNT AND STOCK REGISTER FOR WHICH THE ASSESSEE S IMPLY CONTENDED THAT IN ASSESSEE'S LINE OF BUSINESS, IT IS NOT POSSIBLE TO MAINTAIN DAY TO DAY STOCK REGISTER AS THE ASSESSEE IS DEALING IN VERY LARGE N UMBER OF DIFFERENT KIND OF CONSUMER GOODS. THE AO THUS TOOK INTO CONSIDERAT ION THE CLOSING STOCK ON THE BASIS OF PHYSICAL VERIFICATION MADE BY THE ASSESSEE. THE AO CAME TO THE CONCLUSION THAT IN THE ABSENCE OF SUCH RECORDS, IT IS IMPOSSIBLE TO DEDUCE THE CORRECT PROFIT FROM SUCH B OOKS OF ACCOUNT AND HE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY IN VOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE AO FURTHER OBSERV ED THAT THE SALES OF THE ASSESSEE HAS INCREASED FROM RS. 2,16,98,393/- T O RS. 2,37,09,913/-AND GROSS PROFIT RATE HAS ALSO INCREASED FROM 10.80% TO 10.82% BUT THE TRADING RESULTS OF THE ASSESSEE WERE NOT ACCEPTED B Y THE AO IN THE ABSENCE OF STOCK REGISTER. THE AO THUS MADE A LUMPSUM TRADI NG ADDITION OF RS. 3.00 LACS IN THE HANDS OF THE ASSESSEE BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 145(3) OF THE ACT AND ADDED THE SU M OF RS. 3.00 LACS TO THE INCOME OF THE ASSESSEE. IN FIRST APPEAL, THE LD . CIT(A) HAD REDUCED THE TRADING ADDITION TO RS. 2.00 LACS. IN APPEAL BEFORE THIS BENCH, IT IS NOTED THAT THE GROSS PROFIT RATE OF THE ASSESSEE IS BETTE R THAN PRECEDING YEAR AND ITA NO.39/JP/2017 SHRI PRAVEEN KUMAR SHREEMAL VS. ITO,WARD- 4(1), JAI PUR 5 THE TURNOVER IS ALSO HIGHER FOR THE YEAR UNDER CON SIDERATION. HOWEVER, THE ASSESSEE IS NOT MAINTAINING THE PROPER BOOKS OF ACC OUNT WITH REGARD TO STOCK. THEREFORE, TO PLUG THE LEAKAGE OF REVENUE, C ERTAIN DISALLOWANCE IS INEVITABLE AS THE OPENING STOCK, PURCHASES & SALES AND CLOSING STOCK OF THE ASSESSEE ARE NOT VERIFIABLE. THUS THE LOWER AUT HORITIES ARE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE BY I NVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT BUT THE ADDITION SUSTA INED BY THE LD. CIT(A) TO THE EXTENT OF RS. 2.00 LACS APPEARS TO BE ON HIG HER SIDE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE AND THE SAME IS SUSTAINED TO THE EXTENT OF RS. 50,000/-. THUS THE GROUND NO. 1 OF THE ASSES SEE IS PARTLY ALLOWED. 2.3.1 AS REGARDS, THE GROUND NO. 2 OF THE ASSESSEE, IT IS NOTED THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSE RVED THAT ASSESSEE HAD CLAIMED TELEPHONE EXPENSES OF RS. 72,152/-, CON VEYANCE EXPENSES OF RS. 69,100/-, REPAIRS AND MAINTENANCE EXPENSES OF R S. 51,988/-, CAR INSURANCE EXPENSES OF RS. 12,8434/- AND DEPRECIATIO N ON CAR OF RS. 69,774/- TOTALING TO RS. 2,75,857/-. THE AO OBSERVE D THAT THE EXPENSES CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCO UNT ARE RELATED TO SUCH FACILITIES WHICH ARE CERTAINLY PROVED TO BE USED FO R OTHER THAN BUSINESS PURPOSES FOR WHICH HE RELIED ON THE DECISION OF HON 'BLE MADRAS HIGH COURT IN THE CASE OF SUNDRAM INDUSTRIES LTD. (239 ITR 405). THUS THE ITA NO.39/JP/2017 SHRI PRAVEEN KUMAR SHREEMAL VS. ITO,WARD- 4(1), JAI PUR 6 AO MADE DISALLOWANCE TO THE EXTENT OF 20% OF TOTAL EXPENSES RESULTING INTO ADDITION OF RS. 55,171/-. THE AO ADDED THIS AM OUNT OF RS. 55,171/- TO THE TOTAL INCOME OF THE ASSESSEE. IN FIRST APPEA L, THE LD. CIT(A) REDUCED THE SAME TO THE EXTENT OF 10% INSTEAD OF 20% MADE B Y THE AO. IN APPEAL BEFORE THIS BENCH, IT IS NOTED THAT SIMILAR ISSUE W AS DECIDED BY ITAT JAIPUR (SMC) BENCH VIDE ORDER DATED 29-01-2015 IN A SSESSEE'S OWN CASE IN ITA NO. 598/JP/2014 FOR THE ASSESSMENT YEAR 2008 -09 BY OBSERVING AS UNDER:- 4. I HAVE HEARD THE RIVAL CONTENTIONS OF ON THE OTHER HAND, THE PARTIES AND PERUSED THE MATERIAL AV AILABLE ON THE RECORD. I FIND MERIT IN THE ARGUMENTS OF THE LE ARNED COUNSEL FOR THE ASSESSEE THAT WHEN THE BOOKS OF ACC OUNT ARE REJECTED AND TRADING ADDITION ARE MADE, THERE IS NO JUSTIFICATION IN MAKING FURTHER ADHOC DISALLOWANCE QUA TELEPHONE AND CONVEYANCE. THIS VIEW IS SUPPORTED BY ITAT IN ASSESSEE'S OWN CASE FOR PRECEDING YEAR. IN VIEW THEREOF, THE ADDITION IS DELETED. RESPECTFULLY FOLLOWING THE DECISION OF ITAT JAIPUR BENCH IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2008-09 (SUPRA), I DIRECT TO DELETE THE ADDITION OF RS. 27,585/- (BEING 10% OF THE TOTAL CL AIM) SUSTAINED BY THE LD. CIT(A). THUS GROUND NO. 2 OF THE ASSESSEE IS AL LOWED. ITA NO.39/JP/2017 SHRI PRAVEEN KUMAR SHREEMAL VS. ITO,WARD- 4(1), JAI PUR 7 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/03/201 7. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03 /03/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRAVEEN KUMAR SHREEMAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 4(1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 39/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR