Shri Girish Kumar Tayal, Indore V. THE DCIT 5(1), Indore

ITA 397/IND/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6727 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-04-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: GAGAN TIWARI ADVS
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Third party statement; Set aside
• Section: 143(3); 142(1); 80IB; 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.397/IND/2017 ASSESSMENT YEAR: 2011-12 SHRI GIRISHKUMAR TAYAL PROP. M/S PRADEEP COTEX INDUSTRIES , 4, MAA DURGA NAGAR, INDORE / VS. DCIT-5(1) INDORE ( APPELLANT ) ( RE VENUE) PAN: AATPT3581G APPELLANT BY SHRI SUMIT NEMA, & GAGAN TIWARI, ADVS REVENUE BY SHRI K.G. GOYAL, SR. DR DATE OF HEARING: 10.04.2019 DATE OF PRONOUNCEMENT: 29.04.2019 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL BY ASSESSEE PERTAINING TO A.Y. 2011-12 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INC OME TAX(APPEALS)-II INDORE, (IN SHORT CIT(A)), DATED 27 .02.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER CALLED AS THE ACT) FRAMED ON GIRISHKUMAR TAYAL ITANO.397/IND/2017 2 18.03.2014 BY DCIT, 5(1) INDORE. THE ASSESSEE HAS RAIS ED FOLLOWING GROUNDS OF APPEAL: A. THAT THE ADDITION OF RS. 2,43,63,545/- MADE BY THE AO BY ADOPTING PROFIT@5% ON SALES AND SUSTAINED BY THE CIT(A) IS ARBITRARY AND WITHOUT JUSTIFICATION O N ACCOU NT OF THE FOLLOWING LEGAL AND FACTUAL ERRORS : 1. ARBITRARY REJECTION OF THE BOOKS OF ACCOUNT BY THE AO AND CIT(A) : THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LD. AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS MERELY ON THE BASIS OF CREDIT PURCHASES OF COTTON FROM FARMERS WHO WERE DULY PAID FOR SUCH PURCHASES AFTER A FEW DAYS. BOTH THE FACETS OF CREDIT PURCHASES AND PAYMENT THERE-FO R WERE DULY RECORDED IN THE BOOKS AND MERELY ON' THE BASIS OF A THIRD PARTY STATEMENT WITHOUT ANY CROSS VERIFICATION FROM TILT' FARMERS NO REJECTION OF BOO KS OF ACCOUNTS COULD HAVE BEEN MADE BY THE AO. 2. DEFECT OF DATE OF PAYMENT TO FARMERS IS MERELY ON PRESUMPTION AND SUSPICION AND CANNOT BE A GROUND TO REJECT THE BOOKS : THE AO HAS ACCEPTED THE ENTIRE QUANTUM OF SALE AND PURCHASES AND ALSO THE EXPENSES IN THE AUDITED BOOK S. THE VOUCHERS ARE ALSO NOT DOUBTED. THE ONLY' ALLEGATION WAS THAT OF DATE OF PAYMENT TO THE FARME RS WHICH WAS NOT BASED (, ANY EVIDENCE BUT WAS ON MERE SUSPICION AND WITHOUT ANY CORROBORATIVE EVIDENCE FR OM THE FARMERS. THUS BOOKS OF ACCOUNTS COULD NOT HAVE BEEN REJECTED. 3. FAILURE OF AO TO GRANT CROSS EXAMINATION OF THE KRISHI MANDI SECRETARY TO THE ASSESSEE INSPITE OF SPECIFIC REQUEST MADE BY THE ASSESSEE: THE LD. CIT (A) FAILED TO APPRECIATE THAT WITHOUT A NY OPPORTUNITY OF CROSS EXAMINATION OF KRISHI MANDI SECRETARY MR. K.R. PAGARE BEING GIVEN TO THE ASSESS EE NO ADVERSE INFERENCE THEREFROM COULD HAVE BEEN DRAW N AGAINST THE ASSESSEE. 4. FAILURE OF AO TO ISSUE SUMMONS TO THE FARMERS GIRISHKUMAR TAYAL ITANO.397/IND/2017 3 INSPITE OF SPECIFIC REQUEST MADE BY THE ASSESSEE: THE LD. CIT(A) FAILED TO APPRECIATE THAT A SPECIFIC REQUEST WAS MADE BY THE APPELLANT BEFORE THE AO TO SUMMON THE FARMERS AND A LIST OF SUCH FARMERS WERE DULY SUBMITTED AND THE COMPLETE FAILURE OF THE AO T O SUMMON THE FARMERS AN, VERIFY THE FACTS FROM THEM I S CONTRARY TO THE ESTABLISHED JUDICIAL PRINCIPLES AND IN PARTICULAR THE JURISDICTIONAL HIGH COURT DECISION I N PRAKASH CHAND NAHATA CIT (2008) 301 ITR 134 MP AND THUS THE ENTIRE ASSESSMENT IS VITIATED IN LAW AND DESERVES TO BE QUASHED. 5. FAILURE OF THE AO AND CIT(A) TO APPRECIATE THE CORRECT SCOPE AN AMBIT OF KRISHI UPAJ MANDI ADHINIYAM. : THE LD. CIT(A) FAILED TO APPRECIATE THAT RELIANCE P LACED BY THE AO ON THE PROVISION OF KRISHI UPAJ MANDI ADHINIYAM IS MISPLACED BECAUSE THE SAID AT' DOES NOT BAR CREDIT PURCHASES AND THE FACT THAT ALL FARMERS WERE DULY PAID BY T1 ASSESSEE WITHIN A SHORT SPAN OF 5 T O 10 DAYS SHOWS THAT NO DISCREPANCY CAN BE ATTRIBUTED TO THE BOOKS OF ACCOUNTS WHICH RECORDED THE TRANSAC TION AS THE HAPPENED AND MERELY ON SUSPICION THE BOOKS HAVE BEEN REJECTED BY THE AO. 6. FAILURE OF THE AUTHORITIES TO UNDERSTAND THE DISTINCTION BETWEEN 'SALES INVOICE AND 'PAYMENT RECEIPT': THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ENTIRE ASSESSMENT IS BASED ON 'BIKRI PRAMANK' I.E. THE SAL ES INVOICE WHICH IS ONLY THE EVIDENCE OF DATE OF SALE WITHOUT CONSIDERING THAT THE 'BHUKTAN PRAMANK' I.E. PAYMENT RECEIPT WHICH IS ISSUE ( LATER ON IS THE ACTUAL EVIDENCE OF DATE OF PAYMENT. 7. APPLICATION OF RATE OF PROFIT ON ENTIRE SALES IS ARBITRARY: WITHOUT PREJUDICE TO THE AFORESAID GROUNDS , THE LD . AO AND THE LD. CIT (A) WERE NOT JUSTIFIED EITHER IN LA W OR ON FACTS IN MAKING/ SUSTAINING THE ADDITION OF RS 2,43,63,545/ - BY ADOPTING 5% RATE OF PROFIT ON SAL E. GIRISHKUMAR TAYAL ITANO.397/IND/2017 4 THE SALES WERE NOT AT ALL DOUBTED AND HENCE THE APPLICATION OF GROSS PROFIT ON SALES IS ILL CONCEIV ED AND CONTRARY TO THE FACTS. 8. THE ADOPTION OF RATE OF 5% IS ALSO ARBITRARY: WITHOUT PREJUDICE TO THE AFORESAID GROUNDS, IN ANY CASE THE APPLICATION OF PROFIT @ 5% ON SALES IS ARBITRARY, EXCESSIVE AND HIGH UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE. B. THIS ROUND IS WITHOUT P REJ UDICE TO THE ROUNDS A: 1 TO AND WILL ARISE ONLY IF THE ADDITION/ SOME PORTION THEREOF IS SUSTAINED.) FAILURE TO COMPUTE AND ALLOW DEDUCTION OF 80IB ON THE ESTIMATED PROFIT: 2. THOUGH, THE ABOVE REFERRED GROUNDS ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE BUT THE GRIEVANCE AGAINST FINDING OF THE LD. CIT(A) IS TWO FOLD I.E. CONFIRMING THE AC TION OF THE ASSESSING OFFICER REJECTING THE BOOK RESULTS U/S 143 (3) OF THE ACT AND ESTIMATING NET PROFIT @ 5% OF THE GROSS S ALES. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL RUNNING SOLE PROPRIETORSHIP CONCERN IN THE NAME OF M/S PRADEEP COT EX INDUSTRIES WHICH IS ENGAGED IN THE BUSINESS OF GINNI NG & PRESSING. INCOME OF RS. 50,45,440/- WAS DECLARED IN T HE E- RETURN FILED ON 26.09.2011. CASE WAS SELECTED FOR SCR UTINY FOLLOWED BY SERVING OF NOTICES U/S 143(2) & 142(1) OF THE ACT. LD. AO EXAMINED THE BOOKS OF ACCOUNT AND OTHER DETAILS ON VARIOUS ASPECTS. HOWEVER WE ARE CONFINED TO THE GIRISHKUMAR TAYAL ITANO.397/IND/2017 5 ISSUE OF REJECTION OF BOOK RESULTS AND ESTIMATION OF NET PROFIT. IN THIS REGARD LD. AO CALLED FOR THE DETAILS O F PURCHASES WITH SUPPORTING DOCUMENTS AND OBSERVED THAT AT VARIOUS PLACES THAT THE CASH HAS BEEN CLAIMED TO HAVE BEEN PAID FOR PURCHASES TO THE FARMERS BUT IN THE CASH BOOK THE TRANSACTIONS OF PAYING CASH IS NOT APPEARING. RIDING ON THIS OBSERVATION LD. AO CONCLUDED THAT BOOK S OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT RELIABLE AND ARE THUS LIABLE TO BE REJECTED. HE FURTHER PLACING R ELIANCE ON THE DECISION OF COORDINATE BENCH INDORE IN THE CAS E OF SHRI AMAR AGRAWAL IN ITA NO. 611/IND/2012 DATED 20.08.2013, COMPUTED THE NET PROFIT @ 5% OF THE GR OSS SALES WHICH WORKED OUT TO RS. 2,43,63,545/- AND COMPU TED THE INCOME ACCORDINGLY AFTER MAKING OTHER ADDITION AS MENTIONED IN THE IMPUGNED ASSESSMENT ORDER. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) BUT FAILED TO SUCCEED ON THE GROUNDS OF R EJECTION OF BOOK RESULTS AND ESTIMATION OF NET PROFIT. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. L D. SENIOR COUNSEL FOR THE ASSESSEE REFERRING TO THE WRI TTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A) PRAYED FOR SETTING ASIDE ISSUES RAISED IN THIS APPEAL TO THE FILE OF THE L D. AO FOR AFRESH ADJUDICATION ON ACCOUNT OF THE FOLLOWING REAS ONS: GIRISHKUMAR TAYAL ITANO.397/IND/2017 6 (I) OPPORTUNITY FOR CROSS-EXAMINING THE KRISHI MANDI SECRETARY, WAS NOT GRANTED ON WHOSE STATEMENT ADDITION HAS BEEN MADE. (II) ALLEGED DOCUMENTS REFERRED BY THE LD. AO IN TH E ASSESSMENT ORDER AS BHUGTAN PATRAK ARE ACTUALLY BIKARI PRAMANAK MEANING THEREBY THAT THE PROOF OF SALE OF GOODS HAS BEEN WRONGLY INTERPRETED AS PAYMENT PROOF. (III) FAILURE ON THE PART OF THE LD. AO TO ISSUE SUMM ONS TO THE FARMERS WHO ARE ALLEGED TO HAVE NOT RECEIVED ANY CASH PAYMENT FOR SALE OF CROP INSPITE OF SPECIFIC REQUES T MADE BY BAY ASSESSEE. (IV) LD. AO ERRED IN APPLYING THE DECISION OF COORDI NATE BENCH, INDORE IN THE CASE OF SHRI AMAR AGRAWAL (SUPRA) EVEN WHEN THE ASSESSEES FACTS WERE NOT SAME. 6. PER CONTRA LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER OF BOTH THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ASSESSEE IS AGGRIEVED WI TH THE FINDING OF THE LD. CIT(A) CONFIRMING THE ACTION OF T HE ASSESSING OFFICER FOR REJECTING BOOK RESULTS AND ESTI MATING INCOME BY APPLYING 5% NET PROFIT RATE ON THE GROSS SAL ES. 8. WE OBSERVE THAT THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF GINNING & PRESSING FACTORY, OIL MILL AND COTTON TR ADING. GIRISHKUMAR TAYAL ITANO.397/IND/2017 7 THE ASSESSEE PURCHASES KAPAS FROM FARMERS ON A REGULAR BASIS. THE ASSESSEE IS REGISTERED WITH MADHYA PRADESH KRISHI UPAJ MANDI ADHINIYAM. AT THE TIME OF PURCHASE RECEIPT IS ISSUED BY KRISHI UPAJ MANDI SAMITI IN WHIC H NAME OF THE PURCHASER I.E. ASSESSEE AND NAME OF THE SELL ER I.E. FARMER IS MENTIONED ALONG WITH SERIAL NO. OF AGREE MENT TO PURCHASE, VEHICLE NO. WEIGHT AND VALUE. LD. AO WHIL E EXAMINING THE TRANSACTIONS OF PURCHASE CAME ACROSS BIK RI PRAMANAK WHICH IS PART OF SERIAL NO. BOOK OF KRISHI UPA J MANDI SAMITI. LD. AO COMPARED SOME OF THESE BIKRI PRAMANAK WITH THE CASH BOOK BUT COULD NOT FIND THE EXACT TRANSACTIONS OF CASH PAYMENT IN THE CASH BOOK. TAKING T HIS VARIATION AS SUFFICIENT EVIDENCE LD. AO REJECTED THE BOOKS OF ACCOUNTS AND THE BOOK RESULTS AND ESTIMATED NET PROFIT @5% OF THE GROSS SALES. 9. FROM PERUSAL OF THE PAPER BOOK AND OTHER DETAILS WE FIND THAT THE LD. AO TOOK THE STATEMENT OF THE MR. K. R. P AGARE MANDI SECRETARY COPY OF WHICH IS PLACED AT PAGES 26 TO 2 9 OF THE PAPER BOOK. HOWEVER, THERE IS A LETTER ISSUED BY THE SECRETARY OF KRISHI UPAJ MANDI TO THE ASSESSING OFFICE R ON 09.12.2013 PLACED AT PAGE 23 OF THE PAPER BOOK. IT WAS ISSUED IN REPLY TO THE INFORMATION CALLED U/S 133(6) OF THE ACT AND THIS LETTER IS BEFORE THE DATE OF THE ASSESSME NT I.E. GIRISHKUMAR TAYAL ITANO.397/IND/2017 8 18.03.2014. IN THIS LETTER IT HAS BEEN CLEARLY MENTIO NED THAT IT IS NOT MANDATORY TO MAKE THE CASH PAYMENT IMMEDIATELY AT THE TIME OF MAKING THE PURCHASES. IT IS ONLY WHEN THE SELLER DEMANDS THE AMOUNT. THERE ARE RULES AND REGULATIONS TO PREVENT THE FARMERS IN CASE HE/SHE DO N OT RECEIVE THE PAYMENT THEREBY DIRECTING THE PURCHASER TO PAY THE INTEREST ON DELAYED PAYMENTS. IT IS ALSO MENTION ED IN THIS LETTER THAT THERE IS NO SUCH COMPLAINT IN THE OF FICE OF THE KRISHI UPAJ MANDI AGAINST THE ASSESSEE OF NOT MAKIN G PAYMENT TO THE FARMERS. THE ABOVE LETTER ISSUED BY T HE SECRETARY, KRISHI UPAJ MANDI SAMITI HAS NOT BEEN CONSIDERED BY THE LD. AO. 10. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAS NOT B EEN GRANTED ANY OPPORTUNITY TO CROSS-EXAMINE THE KRISHI UP AJ MANDI SAMITI, SECRETARY. FURTHER, WE FIND THAT THE LIST OF FARMERS ALLEGED TO HAVE NOT RECEIVED PAYMENT FOR PURCH ASE WAS PROVIDED BY THE ASSESSEE BUT THE LD. AO WAS NOT INCLINED TO ISSUE SUMMONS TO THE FARMERS TO VERIFY W HETHER THEY HAVE RECEIVED THE PAYMENT OR NOT. 11. IN THESE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN EXCEPT FOR THE MISMATCH OF THE CASH PAYMENT TRANSACTIONS IN THE CASH BOOK VIZ-A-VIZ THE DOCUMENTS ISSUED BY THE KRISHI UPAJ MANDI, THERE IS NO OTHER E RROR GIRISHKUMAR TAYAL ITANO.397/IND/2017 9 POINTED OUT BY THE LD. AO. WE FIND THAT THE LD. AO H AS NOT CONDUCTED THE ASSESSMENT PROCEEDINGS ON PRINCIPLES O F NATURAL JUSTICE AS REASONABLE OPPORTUNITY WAS NOT PROVID ED TO THE ASSESSEE TO CROSS EXAMINE THE PERSON WHOSE STATEMENT WAS USED AGAINST HIM, NO SUMMONS WERE ISSUED TO THE FARMERS FOR VERIFYING THE TRANSACTIONS IN SPITE OF SPECIFIC REQUEST PRAYED BY THE ASSESSEE. ALSO THERE I S FAILURE ON THE PART OF THE ASSESSING OFFICER TO DISTIN GUISH THE SALE INVOICE (BIKRI PRAMANAK) WITH THE PAYMENT RECEIPTS I.E. BHUGTAN PATRAK. 12. WE, THEREFORE, SET ASIDE ALL THE ISSUES RAISED IN THIS APPEAL TO THE FILE OF THE LD. AO WHO WILL EXAMINE ALL T HE ISSUES AFRESH AFTER PROVIDING REASONABLE AND PROPER OPPORTUNITY OF BEING HEARD AS WELL AS PROVIDING OPPORT UNITY OF CROSS-EXAMINATION (IF REQUESTED). LD. AO SHOULD ALSO BRING ON RECORD THE BHUGTAN PRAMANAK I.E. PAYMENT RECEIPT WHICH HAS BEEN WRONGLY TERMED IN THE ASSESSME NT ORDER IN THE PLACE OF SALES INVOICE I.E. BIKRI PRAMANAK . FURTHER, LOOKING TO THE RECORDS WE FIND THAT THE ASSE SSEE HAS NOT COOPERATED THE ASSESSING OFFICER AT THE TIME OF THE REMAND REPORT BEING CALLED BY THE LD. CIT(A) AND DID N OT ATTEND ON VARIOUS OCCASIONS AND ALSO DID NOT FILE THE D ETAILS REQUIRED BY THE ASSESSING OFFICER. THE ASSESSEE SHOULD GIRISHKUMAR TAYAL ITANO.397/IND/2017 10 THEREFORE ENSURE TO COOPERATE IN THE SET ASIDE PROCEE DINGS AND IN CASE IF ASSESSEE DO NOT ATTEND THE HEARING OR FAIL TO PLACE THE REQUISITE MATERIAL ON RECORD AS REQUIRED THEN THE ASSESSING OFFICER WILL BE AT LIBERTY TO DECIDE THE IS SUES AS PER THE PROVISIONS OF LAW. 13 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 .04 .2019. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 29/04/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR