Sh. Nadeem, Meerut V. ITO, Meerut

ITA 3963/DEL/2014

• Counselvise Citation: 396320114 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SEODAN SINGH BHADDORIA
• Keywords: Business income; Principle of natural justice
• Section: 133(6)

Judgement Text

ITA NO 3963 DEL 2014 NADEEM V ITO A Y 2009 - 10 1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ES, NEW DELHI (CIRCUIT BENCH AT MEERUT) BEFORE : SHRI I.C. SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER ITA NO. 3963/DEL./2014 ASSTT. YEAR: 2009 - 10 NADEEM C/O VINOD KUMAR GOEL, VS. INCOME - TAX OFFICER, BOUNDARY ROAD, CIVIL LINES, MEERUT. WARD 2(1), MEERUT. [PAN: ADUPN2318M] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VINOD KUMAR GOEL, ADVOCATE RE VENUE BY : SH. SEODAN SINGH BHADDORIA, SR. DR DATE OF HEARING : 14.12.2015 DATE OF PRONOUNCEMENT : 22 .12.2015 ORDER PER PRASHANT MAHARISHI , ACCOUNTANT MEMBER: 1 . THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT ( A), MEERUT AGAINST CONFIRMATION OF ADDITION OF RS.21,92,965/ - ADOPTING THE GROSS PROFIT R ATE AT 1.5% OF THE TOTAL SALES ALONG WITH THE GRIEVANCEOF NATURAL JUSTICE. 2 . GROUND NO 1 OF THE APPEAL IS CONTENDING NON - GRANTING OF ENOUGH OPPORTUNITY OF HEARING BY LD. CIT (A). THIS GROUND WAS NOT PRE SSED AND HENCE DISMISSED. ITA NO. PAGE | 2 2 3 . B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF MEAT DURING THE YEAR. DURING THE ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAD MADE PURCHASE OF MEAT OF RS.16,87,54,803/ - AND HAS ALSO SHOWN THE MEAT SALES OF THE SAME AMOUNT AND NO GROSS PROFIT THEREON HAS BEEN WORKED OUT. AGAINST THIS, THE ASSESSEE HAS SHOWN COMMISSION RECEIPT OFRS.4,93,151/ - AND AFTER DEDUCTING VARIOUS EXPENSES, THE NET PROFIT OF RS.1,54,794/ - WAS DISCLOSED, WHIC H IS 0.092% OF TURNOVER AS AGAINST THE NET PROFIT OF 0.688% IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR. DURING THE ASSESSMENT YEAR, THE ASSESSEE HAS PURCHASED MEAT FROM VARIOUS PARTIES. HOWEVER, THE ADDRESSES OF SUCH PARTIES WERE NOT FURNISHED AND THEREFOR E, THE AO STATED THAT THE PURCHASES ARE NOT VERIFIABLE. REGARDING THE VERIFICATION OF SALES, THE AO ISSUED NOTICE U/S. 133(6) TO THE BUYERS. HOWEVER, NO COMPLIANCE WAS RECEIVED. IN ABSENCE OF ALL THESE DETAILS, THE AO ESTIMATED GROSS PROFIT 1.5% ON THE TUR NOVER OF RS.16,87,54,803/ - AND DETERMINED THE GROSS PROFIT OF RS.25,31,322/ - AND DEDUCTED THE EXPENSES THERE FROM DEBITED IN THE PROFIT AND LOSS ACCOUNT OF RS.3,38,357/ - AND MADE AN ADDITION OF RS.21,92,965/ - . AGAINST THIS, THE ASSESSEE PREFERRED APPEAL BE FORE THE CIT ( A), WHO IN TURN, CONFIRMED THE ADDITION HOLDING THAT THE APPELLANT HAD NOT ITA NO. PAGE | 3 3 FURNISHED EVIDENCE REGARDING PURCHASE AND SALES MADE. FURTHER HE HELD THAT AS APPELLANT ALSO COULD NOT ESTABLISH THE COMMISSION @ 0.25% RECEIVED FROM THE PURCHASER, AND IN ABSENCE OF ANY CONFIRMATION U/S. 133(6) RECEIVED FROM VARIOUS PARTIES, HE WAS OF THE VIEW THAT THE EVIDENCES SUBMITTED BY THE ASSESSEE ARE SELF - SERVING. 4 . B EFORE US, THE LD. AR OF THE APPELLANT SUBMITTED THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS WHICH ARE AUDITED AND SUPPORTED BY BANK ACCOUNT. HE FURTHER SUBMITTED THAT THECOMMISSION ON MEAT IS RS.0.25 PAISA PER KG AND THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE ON COMMISSION BASIS. THE ASSESSEE IS ALSO ENGAGED ON SUPPL Y OF BONES TOO ON COMMISSION BASIS AND THEREFORE, THE PURCHASE AND SALES ARE BOUND TO BE SAME. THE COMMISSION EARNED BY THE ASSESSEE IS 0.25 PAISA PER KG. AND THE TOTAL COMMISSION EARNED BY THE ASSESSEE OF RS.4,93,151/ - HAS BEEN SHOWN IN THE PROFIT AND LOS S ACCOUNT. IT WAS ALSO SUBMITTED THAT THE COMMISSION IS FIXED PER KG AND IT IS NOT THE PERCENTAGE BASED ON SALES AS UNDERSTOOD BY CIT (A ). IT WAS THE CONTENTION OF THE AR THAT ALL THE SUPPLIERS FROM WHOM THE ASSESSEE IS PURCHASING MEAT ARE ILLITERATE AND C ANNOT HAVE THE DOCUMENTATION AS ACCEPTED BY THE AO AND THEREFORE, THE PURCHASES ARE BOOK ED ON THE BASIS OF SELF - MADE VOUCHERS SINGED BY THOSE SUPPLIERS. REGARDING THE ITA NO. PAGE | 4 4 SALE OF GOODS, IT WAS SUBMITTED THAT THESALE IS T O THE PARTIES WHO ARE COMPARATIVELY OF L ARGE SIZE AND THEY MIGH T NOT HAVE RESPONDED TO 133(6) NOTICES SENT BY THEAO, BUT IT CANNOT BETAKEN ADVERSELY AGAINST THE ASSESS E E. AGAINST THIS, THE ASSESSEE HAS SUBMITTED THEIR COPY OF ACCOUNT WHICH SHOWS GOODS SOLD TO THEM AND PAYMENTS RECEIVED FROM THEM . HE FURTHER SUBMITTED THAT FOR LAST MANY YEARS , THE RATE OF COMMISSION FROM THE SLAUGHTER HOUSES IS 0.25 PAISA PER KG ONLY. HE FUR THER SUBMITTED THAT IN THE IDENTICAL CASE, I.E., IN THE CASE OF SHAH KHALID IN APPEAL NO. 391/11 - 12 DATED 25.02.2013, WHERE W HILE DELETING THE ADDITION OF RS.37.19 LACS ESTIMATING THE INCOME OF ASSESSEE AT 1% OF GROSS SALES, THE CIT(A) HAS HELD THAT WHEN SUPPLIERS DO NOT RAISE BILL, THE ASSESSEE CAN ONLY KEEP SELF - MADE VOUCHERS. FURTHER, THE ASSESSEE CANNOT BE FAULTED WITH FOR N ON - RECEIPT OF CONFIRMATION FROM THE SELLERS AND IN THE SAME MANNER COMMISSION @ 0.25 PAISA PER KG. WAS ACCEPTED. THEREFORE, IN THE CASE OF ASSESSEE ALSO THE ADDITION OF RS.21,92,965/ - IS REQUIRED TO BE DELETED. HE FURTHER SUBMITTED THAT ON IDENTICAL ISSUE, HONBLE ITAT IN ITA NO. 3961/DEL./2014 IN THE CASE OF MOHD. FARDEEN, HAS SET ASIDE THE ISSUE TO THE FILE OF CIT ( A) FOR DECIDING THE MATTER AFRESH. ITA NO. PAGE | 5 5 5 . THE LD. DR SUPPORTED -- THE ORDERS OF THE LOWER AUTHORITIES VEHEMENTLY AND SUBMITTED THAT THE ADDITION HAS B EEN RIGHTLY MADE AND CONFIRMED. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO THE FACTS OF THE CASE. DURING THIS YEAR, THE ASSESSEE H A S MADE PURCHASES OF MEAT AND SALES OF MEAT OF RS.16,87,54,803/ - AFTER SHOWING THE COMMISSION OF RS.4,93,151/ - DISCLOSED NET PROFIT OF RS.1,54,794/ - . THE NET PROFIT RATIO OF THE ASSESSEE IS 0.092% AS AGAINST NET PROFIT RATIO OF 0.69% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE SALES OF THE ASSESSEE WERE OF RS.4, 54,59,127/ - AND IN THIS YEAR IT IS RS. 16,87,54,803/ - AND THEREFORE, THERE IS A JUMP OF ALMOST FOUR TIMES IN THE TURNOVER OF THE ASSESSEE. THE NET PROFIT DISCLOSED IN THE YEAR, THEREFORE, DECLINED BY 0.6% OF THE SALES. L OOKING TO THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, PREPARING SELF - MADE VOUCHERS FOR PURCHASE BY ASSESSEE HIMSELF AND CONFIRMED BY THE SUPPLIERS IS AN ACCEPTABLE PRACTICE WHERE THE ASSESSEE IS DEALING WITH THE ILLITERATE SELLERS OF THE GOODS . THE GOODS ARE SOLD TO VARIOUS PARTI ES BY PREPARING THE BILLS OF SALES BY THE ASSESSEE. THEREFORE, THE AMOUNT OF PURCHASE AND SALES IS SAME AND ASSESSEE ACCOUNTS FOR COMMISSION @ 0.25 PAISA PER KG. OF GOODS TRADED. THE CIT ( A) HAS CONFUSED THIS RATE OF COMMISSION AND DECIDED THE ISSUE ASSUMI NG THAT THE RATE OF COMMISSION ITA NO. PAGE | 6 6 IS 0.25% WHICH IS NOT CORRECT , IN FACT IT IS RS. 0.25 WHICH IS ALSO EVIDENT FROM THE ORDERS PLACED BEFORE US IN CASE OF OTHER ASSESSES ENGAGED IN SIMILAR TRADE. THEREFORE, IT IS CLEAR THAT THE RATE OF COMMISSION HAS BEEN S TATED BY THE ASSESSEE WHICH IS SIMILAR TO OTHER ASSESSES IN THE SAME TRADER FOR SAME ASSESSMENT YEAR . ON PERUSAL OF THE ASSESSMENT ORDER, IT IS APPARENT THAT THOUGH THE BOOKS OF ACCOUNTS ARE AUDITED, THE AO COULD NOT FIND ANY DEFECT THEREIN. THE ONLY REASO N FOR MAKING THE ADDITION IS THAT THE ASSESSEE COULD NOT SUBMIT THE ADDRESSES OF THE PARTIES FROM WHOM THEPURCHASES HAVE BEEN MADE AND ONLY ONE OF THE BUYERS OF THE ASSESSEE M/S. INDAGRA FOODS LTD., KANPUR TO WHOM SALES OF RS.14,00,82,168/ - HAS BEEN MADE O UT OF TOTAL SALES OF RS. 16.87 CRORES DID NOT RESPOND TO NOTICE U/S 133(6) OF THE ACT. IN C A SE OF FURTHER FIVE PARTIES TO WHOM 133(6) NOTICES WERE SENT, THEY CONFIRMED THE TRANSACTIONS. HOWEVER, THEY DID NOT SEND THE COPIES OF THE BILLS IN RESPECT OF THE PURCHASES MADE FROM THE ASSESSEE. HENCE, THE ADDITION IS MADE ESTIMATING THE GROSS PROFIT RATIO @ 1.5 % OF TURNOVER IS INCORRECT WHEN AO HAS ALSO ACCEPTED THAT THE ASSESSEE IS TRADING IN PURCHASE AND SALES OF MEAT ON COMMISSION BASIS AS LD. AO HIMSE LF HAS ISSUED SHOW CAUSE NOTICE TO ASSESSEE TO ESTIMATE THE COMMISSION @ RS 1 PER KG. THEREFORE WE ARE OF THE VIEW THAT INCOME OF THE ASSESSEE NEEDS TO BE ITA NO. PAGE | 7 7 EXAMINED IN COMPARISON WITH THE ASSESSEE DEALING IN SIMILAR NATURE OF BUSINESS AND FOR THE YEAR UNDER CONSIDERATION. HENCE WE REVERSE THE FINDING OF THE CIT (A ) AND SET ASIDE THE ISSUE BACK TO THE FILE OF AO TO ESTIMATE COMMISSIONINCOME CITING THE COMPARABLE CASES. THEREFORE GROUND NO 2 AND 2 OF THE APPEAL ARE ALLOWED WITH ABOVE DIRECTION. 7 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O R D E R P R O N O U N C E D I N T H E O P E N C O U R T O N 2 2 . 1 2 . 2 0 1 5 . - S D / - - S D / - ( I.C. SUDHIR ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 2 . 1 2 . 2 0 1 5 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDEN T (3) COMMISSIONER (4) CIT ( A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI