INCOME TAX OFFICER, WARD 3(1), SRINAGAR V. SH. FAYAZ AHMED BHAT, SRINAGAR

ITA 394/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5724 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-02-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 20-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S NEGI
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. R.S.SYAL, VICE PRESIDENT AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.394(ASR)/2017 ASSESSMENT YEAR:2012-13 INCOME TAX OFFICER WARD3(1), SRINAGAR VS. SHRI FAYAZ AHMAD BHAT PROP. M/S G.M. STEEL H.S.H. STREET, SRINAGAR PAN:BBFPB198B (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.S. NEGI (DR) RESPONDENT BY: NONE DATE OF HEARING: 19.02.2018 DATE OF PRONOUNCEMENT: 21.02.2018 ORDER PER N.K.CHOUDHRY. JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE REVENUE DEPARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 02.02.201 7 PASSED BY THE LD. CIT(A), J&K, JAMMU, IN APPEAL NO.199/15-16, BY RAISI NG THE FOLLOWING GROUNDS OF APPEAL. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT I N ALLOWING THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE AO HAS ACCEPTED THE NE T PROFIT RATE OF 0.66% IN THE A.Y.2013-14 & 2014-15 AND ACCORDINGLY THE SAME SHOULD BE ADHERED TO IN THE A.Y.2012-13 ALSO. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN ACCEPTING THE PLEA OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE CUR RENT YEAR IS A DIFFERENT YEAR AND HAS DELETED THE ADDITION MADE WITHOUT CONSIDERI NG THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE THE TRADING RESULTS DECLAR ED FOR THE YEAR UNDER CONSIDERATION. ITA NO.394 /ASR/2017 (A.Y.2012-13) ITO V S. SH. FAYAZ AHMAD BHAT, SRINAGAR 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS WORKIN G AS AN INDIVIDUAL UNDER THE NAME AND STYLE OF M/S. G.M. STEE L, DEALING IN WHOLESALE BUSINESS OF G.C. SHEETS, FIBER GLASS, BARBED WIRES AND COL OR COATED SHEETS, HAVING ITS PRINCIPAL PLACE/HEAD OFFICE SITUATED AT HARI S INGH HIGH STREET, SRINAGAR, KASHMIR. THE ASSESSEE HAS FILED ITS RETURN OF IN COME ALONG WITH AUDITED ACCOUNTS AND HAS DECLARED SALES AT RS.11,54,56,867 /- AND GROSS PROFIT OF RS.21,92,989/- GIVING A G.P. RATE OF 1.90% , AGAINST THE SAID RECEIPTS, THE ASSESSEE HAS DEBITED VARIOUS EXPENSES UNDER DIF FERENT HEADS AND HAS DECLARED A NET PROFIT OF RS.7,66,425/- ATTRIBU TING A NET PROFIT RATE OF 0.66%. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED T HAT THE ASSESSEE HAS NOT MAINTAINED SUBSTANTIAL VERIFIABLE DOCUMENT ARY EVIDENCE IN RESPECT OF THE EXPENDITURE CLAIMED UNDER THE HEADS PURCH ASES AT RS.12,71,49,789/- AND 'FREIGHT' OF RS.44,97,202/- AND VARIOUS OTHER EXPENSES DEBITED IN THE P & L A/C. THE ASSESSEE ALSO FAILE D TO FURNISH INVENTORY OF THE CLOSING STOCK AS ON 31/03/2012 AND A LSO FAILED TO FURNISH COMPLETE DETAILS OF LIABILITY SHOWN ON ACCOUNT OF 'SUNDR Y CREDITORS'. WHEN THE AO ASKED THE ASSESSEE TO SUBSTANTIATE THE PURCHASES, THE FRE IGHT, THE VARIOUS EXPENSES AND THE OTHER LIABILITIES, THE ASSESSEE SUB MITTED THAT THESE ARE NOT AVAILABLE AS THE BUSINESS PREMISES/OFFICE OF THE ASSESSEE DROWNED DURING THE DEVASTATING FLOODS OF SEPTEMBER, 2014 AND BOOKS OF ACCOUNT AND SUBSIDIARY RECORDS EITHER GOT DESTROYED OR BADLY DAMAGED . THE ASSESSEE PLEADED THAT SINCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED THE SAME SHOULD BE ACCEPTED AS EVIDENCE. THE AO HOWEVER, WAS NOT CONVINCED WITH THE REPLIES OF T HE ASSESSEE AND CONCLUDED THAT BOOK VERSION/RESULT DECLARED BY THE A SSESSEE IS NOT CORRECT AND COMPLETE AS SUCH THE SAME DESERVES TO BE REJECTE D U/S. 145(3) OF THE INCOME TAX ACT, 1961. THE AO ALSO DRAWN THE ATT ENTION OF THE ASSESSEE TO THE DECISION IN THE CASE OF ACTION ELECTRICALS VS. CIT [2002] 258 ITA NO.394 /ASR/2017 (A.Y.2012-13) ITO V S. SH. FAYAZ AHMAD BHAT, SRINAGAR 3 ITR 188 ( DELHI ) WHERE THE ACTION OF THE AO U/S. 145 (3) OF THE INCOME TAX ACT WAS JUSTIFIED, WHEN THE AO WAS NOT SATISFIED ABOUT TH E CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. IN RESPONSE TO THAT THE ASSESSEE STATED THAT EACH AND EVERY ITEM OF EXPENDITURE CLAIMED IN THE PROFIT AND LOSS AND IN THE BALANCE SHEET ARE CORRECT, THOUGH, HE EXPRESSED ITS INABILITY TO PRODUCE T HE SUBSIDIARY RECORDS WHICH GOT WASHED AWAY IN THE FLOOD OF SEPTEMBER, 2014 , HOWEVER NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE AO RE JECTED THE BOOK RESULTS U/S 145(3) OF THE ACT AND APPLIED A NET PROFIT RATE OF 3.5% ON THE GROSS TURNOVER OF RS.11,54,867/- WHICH COMES TO RS.44,40, 990/- AND ADDED THIS AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. 3. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE L D. CIT(A), THE REVENUE DEPARTMENT PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE SUBMITTED THAT THE LD. CIT(A) WAS NOT RIGHT IN LAW AN D FACT IN ALLOWING THE APPEAL OF THE ASSESSEE BY HOLDING THAT AO HAD ACCEPTED T HE NET PROFIT RATE OF 0.66% IN THE ASST. YEAR; 2013-14 AND 2014-15 AND ACCOR DINGLY THE SAME SHOULD BE ADHERED TO IN THE ASST. YEAR.2012-13 ALSO. FU RTHER, IT WAS ALSO ARGUED THAT THE LD. CIT(A) HAS COMMITTED THE ERROR IN LAW AND FACT, IN ACCEPTING THE PLEA OF THE ASSESSEE WITHOUT APPRECIATING TH E FACT THAT THE CURRENT YEAR IS A DIFFERENT YEAR AND HAS DELETED THE A DDITION MADE WITHOUT CONSIDERING THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE THE TRADING RESULTS DECLARED FOR THE YEAR UNDER CONSIDERATION. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ORDER PASSED BY THE LD. CIT(A). THE LD. CIT(A) TAKEN INTO CONSIDERATION T HE FACTS THAT THE APPELLANT HAS MAINTAINED ALL THE NECESSARY ACCOUNTS LIKE CA SH BOOK, LEDGER AND OTHER SUBSIDIARY RECORDS ALONG WITH BILLS AND VOUC HERS AND THE ACCOUNTS ITA NO.394 /ASR/2017 (A.Y.2012-13) ITO V S. SH. FAYAZ AHMAD BHAT, SRINAGAR 4 OF THE ASSESSEE WERE ALSO AUDITED, HOWEVER, THE SUBSIDIARY RECORDS AND THE BILLS AND VOUCHERS WERE DESTROYED IN SEPTEMBER, 2014 F LOODS AND THAT IS WHY FAILED TO BRING EITHER IN THE ASSESSMENT OR APPELLA TE PROCEEDINGS. THE CIT(A) HAS ALSO TAKEN INTO CONSIDERATION THAT NET PRO FIT RATE APPLIED @ 3.5% AND GROSS TURN OVER WAS TOO HIGH CONSIDERING THE BUSINE SS OF THE ASSESSEE, WHOSE SALES STOOD AT VERY LOW AND G.P. RATE AND N.P. RA TE HAS BEEN INCREASED IN COMPARISON TO THE LAST YEAR AND THE A.O HA S ALSO ACCEPTED THE NET PROFIT RATE OF 0.94% IN THE ASST. YEAR 2013-14 AN D 2014-15, THUS, NET PROFIT RATE DECLARED BY THE APPELLANT IN THE RETURN OF INCOME SHOULD BE ACCEPTED. THE LD. CIT(A) FOUND NO REASON FOR THE A.O T O ESTIMATE THE NET PROFIT RATE AT 3.5% ON THE GROSS TURN OVER WITHOUT HA VING ANY EVIDENCE THAT IT HAS EARNED MORE PROFIT IN COMPARISON TO THE EARLIE R YEAR OR SUBSEQUENT YEAR. WE DO NOT FIND ANY INFIRMITY, ILLEGALITY AND IMPROP RIETY IN THE ORDER PASSED BY THE CIT(A) BECAUSE WHILE ACCEPTING THE N.P RATE AS DECLARED BY THE APPELLANT IN THE RETURN OF INCOME, THE LD. CIT(A ) CONSIDERED THE ACCEPTED NET PROFIT RATE DURING THE A.Y. 2013-14 AND 2014-15 BY THE A.O WHILE PASSING THE ORDER U/S 143(3) OF THE I.T. ACT. HEN CE THE ORDER MADE CHALLENGE DOES NOT REQUIRE ANY INTERFERENCE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPAR TMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 .02.2018. SD/- SD/- (R.S.SYAL) (N.K.CHOUDHRY) VICE PRESIDENT JUDICIAL MEMBER DATED: 21.02.2018 /PK/ PS. ITA NO.394 /ASR/2017 (A.Y.2012-13) ITO V S. SH. FAYAZ AHMAD BHAT, SRINAGAR 5 COPY OF THE ORDER FORWARDED TO: (1) SH. FAYAZ AHMAD BHAT, SRINAGAR (2) THE ITO, WARD,3(1), SRINAGAR (3) THE CIT(A) J&K, JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER