Sh. Ashok Kumar Vershney, Hathras V. A.C.I.T., Central Circle, Agra

ITA 412/AGR/2012

• Counselvise Citation: 41220314 RSA 2012
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 24-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NAVIN GARGH
• Keywords: Business income; Business expenditure; Loose papers
• Section: 133A; 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 410, 411, 412 & 423/AGRA/2012 ASSTT. YEAR : 2000-01, 2001-02, 2002-03 & 2003-04 ASHOK KUMAR VARSHNEY VS. A.C.I.T., CENTRAL CIRCL E, A-2, PREM NAGAR COLONY, AGRA. HATHRAS (U.P.) (PAN : AAQPV 0860 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVIN GARGH, ADVOCATE RESPONDENT BY : SHRI WASEEM ARSHAD, SR. D.R. DATE OF HEARING : 13.12.2012 DATE OF PRONOUNCEMENT OF ORDER : 28.12.2012 ORDER PER BHAVNESH SAINI, J.M.: ALL THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST DIFFERENT ORDERS OF LD. CIT(A)-I, AGRA DATED 22.03.2012 FOR ABOVE ASSESSMEN T YEARS 2000-01 TO 2003- 04. 2. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUNDS NOS. 2 & 3 IN ALL THE ABOVE APPEALS. THE SAME ARE, ACCORDINGLY, DISMISSED . ITA NOS.410, 411, 412 & 423/AGRA/2012 2 ON GROUND NO. 1 IN ALL THE APPEALS, THE ASSESSEE C HALLENGED THE APPLICATION OF PROFIT RATE OF 10% CONFIRMED BY THE LD. CIT(A) A S AGAINST 8% SHOWN BY THE ASSESSEE. IT IS STATED THAT THE FACTS AND ISSUES AR E SAME IN ALL THE APPEALS, THEREFORE, FOR THE PURPOSE OF DISPOSAL OF ALL THE APPEALS, THE FACTS ARE TAKEN FROM ITA NO. 410/AGRA/2012. ITA NO. 410/AGRA/2012 : 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE DRIVES INCOME FROM MANUFACTURING AND TRADING OF CHURAN, CHATNI, JALZEE RA ETC. A SEARCH U/S. 132(1) AND SURVEY U/S. 133A OF THE IT ACT WERE CONDUCTED A T THE PREMISES OF THE ASSESSEE AND HIS WIFE SMT. SADHANA VARSHNEY AND D.K . VARSHNEY AND OTHERS AND THEIR BUSINESS CONCERNS ON 28.02.2006. ON SEARCH/SU RVEY OF SUCH PREMISES, CERTAIN DOCUMENTS/BOOKS OF ACCOUNT, LOOSE PAPERS ET C. WERE FOUND. THE ASSESSEE IN RESPONSE TO NOTICE U/S. 153A DECLARED INCOME OF RS.3,72,640/-. DURING THE COURSE OF SEARCH OF THE RESIDENTIAL PREMISES OF THE ASSESSEE, CERTAIN BOOKS OF ACCOUNT, LOOSE PAPERS INVETORIZED AS ANNEXURE A-1 T O A-4 WERE FOUND. FROM THE PERUSAL OF THE DETAILS OF BOOKS IT WAS SEEN THAT TH EY WERE CONTAINING THE DETAILS OF EXPENDITURE INCURRED ON DAY-TO-DAY BASIS ON DIFFERE NT ITEMS AND ALSO CONTAINED SALES OF DIFFERENT ITEMS ON RIGHT SIDE, SUMMARY OF WHICH IS NOTED IN PARA 1 OF THE ASSESSMENT ORDER. THE ASSESSEES EXPLANATION WAS SO UGHT WITH REGARD TO SEIZED ITA NOS.410, 411, 412 & 423/AGRA/2012 3 MATERIAL. IN THE SAME SEARCH OF THE PREMISES OF M/S . D.K. FOOD PRODUCTS, CERTAIN BOOKS AS ANNEXURE-A-1 TO A-13 WERE FOUND AND SEIZED . THE ASSESSEE EXPLAINED THAT HE IS DOING THE ABOVE BUSINESS OF DIFFERENT TY PES OF CHURAN AND JALZEERA ETC. LOOSE PAPERS RELATE TO THE PERIOD OCTOBER AND DECEM BER, 2005 CONTAINING BUSINESS EXPENSES INCURRED IN CONNECTION WITH THIS BUSINESS. NO REGULAR BOOKS OF ACCOUNT HAVE BEEN MAINTAINED. THE SEIZED MATERIAL I S THE MEMORANDUM NOTE BOOK HAVING NOTINGS INCLUDING BUSINESS OF MANUFACTU RING AND DEALING IN DIFFERENT TYPES OF CURAN AND JALZEERA ETC. THE RETURN OF INCO ME HAS BEEN FILED EARLIER. INCOME WAS SHOWN AS PER THE ANNEXURES FOUND DURING THE COURSE OF SEARCH ON ESTIMATE BASIS. THE AO CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT COMPLETE DETAILS HAVE NOT BEEN FURNISHED BY THE ASS ESSEE OF BUSINESS ACTIVITIES AND NO BOOKS OF ACCOUNTS ARE MAINTAINED. THEREFORE, THE AO WAS OF THE VIEW THAT CORRECTNESS OF THE INCOME OF THE ASSESSEE COULD NOT BE VERIFIED. THEREFORE, THE PROFIT IS TO BE ESTIMATED ON ESTIMATION OF SALES. T HE SALES WERE ESTIMATED AT HIGHER FIGURE AS AGAINST THE FIGURE SHOWN BY THE ASSESSEE AND PROFIT RATE OF 12% WAS APPLIED AND BUSINESS INCOME WAS COMPUTED AT RS.4,20 ,000/- AS AGAINST RS.2,60,000/- WORKED OUT BY THE ASSESSEE. THE ADDIT ION OF RS.1,60,000/- WAS CHALLENGED BEFORE THE LD. CIT(A) AND WRITTEN SUBMIS SIONS OF THE ASSESSEE ARE REPRODUCED IN THE IMPUGNED ORDER, IN WHICH THE ASSE SSEE BRIEFLY EXPLAINED THAT THE ASSESSEE IS REGULARLY ASSESSED TO TAX AND INCOM E WAS ESTIMATED FROM THE ITA NOS.410, 411, 412 & 423/AGRA/2012 4 SEIZED MATERIAL, WHICH CONTAINED THE DETAILS OF BUS INESS ACTIVITIES THOUGH NO REGULAR BOOKS OF ACCOUNT HAVE BEEN MAINTAINED. THER E WAS NO BASIS TO ENHANCE THE SALES BECAUSE THE SALES HAVE BEEN ESTIMATED ON THE BASIS OF THE SEIZED MATERIAL AND THE ASSESSEE HAS SHOWN PROFIT RATE OF 8%. THE N ATURE OF BUSINESS IS DEALING IN CHURAN, CHATNI, JALZEERA IN WHOLESALE AND SEMI-WHOL ESALE, THEREFORE, THE PROFIT RATE OF 12% IS UNJUSTIFIED. IN THE CASE OF M/S. D.K . FOOD PRODUCTS, MAXIMUM PROFIT RATE HAS BEEN SHOWN AT 10.6% IN ASSESSMENT Y EAR 2002-03 AND IN OTHER ASSESSMENT YEARS, IT WAS MUCH LESS. THEREFORE, THE AVERAGE PROFIT OF M/S. D.K. FOOD PRODUCT COMES TO LESSER THAN 8%. THE PRODUCT, IN WHICH THE ASSESSEE IS DEALING IS HIGHLY PERISHABLE IN NATURE AND GETS DEF ECTIVE FREQUENTLY DUE TO MOISTURE AND NON-STANDARD PRODUCT, THEREFORE, THE P ROFIT MARGIN IS VERY LOW. THE WORKING OF THE BUSINESS OF THE ASSESSEE IS FROM UNO RGANIZED SECTOR. THE ASSESSEE IN THE YEAR OF SEARCH, I.E., A.Y. 2006-07 HAS ALREA DY SURRENDERED RS.70,00,000/- ON ACCOUNT OF CASH AND OTHER INVESTMENTS, THEREFORE , THE PROFIT RATE SHOULD BE REDUCED ALONGWITH ENHANCEMENT IN THE SALES/TURNOVER . 4. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE AS SESSEE WITH REGARD TO ENHANCEMENT IN THE SALES/TURNOVER BECAUSE WHATEVER TURNOVER WAS DECLARED BY THE ASSESSEE WAS BASED ON THE SEIZED MATERIAL ITSELF. T HEREFORE, THE ORDER OF THE AO TO THAT EXTENT WAS SET ASIDE AND THE SALES / TURNOVER DECLARED BY THE ASSESSEE WAS ITA NOS.410, 411, 412 & 423/AGRA/2012 5 ACCEPTED. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE PROFIT RATE OF 12% IS EXCESSIVE BECAUSE THE AO HAS NOT GIV EN ANY BASIS FOR ADOPTING THE PROFIT RATE OF 12% AND EVEN IN THE CASE OF M/S. D.K . FOOD PRODUCTS, LESSER RATE HAS BEEN APPLIED. THE LD. CIT(A), THEREFORE, DIRECT ED TO APPLY THE PROFIT RATE OF 10% AS AGAINST DISCLOSED RATE AND RESTRICTED THE AD DITION TO RS.66,607/- AND ALLOWED THE APPEAL OF THE ASSESSEE PARTLY. THE ASSE SSEE IN GROUND NO. 1 CHALLENGED THE ADDITION OF RS.66,607/- BY APPLYING THE PROFIT RATE OF 10%. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). ON THE OTHER HAND, THE LD. DR RELIED UP ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FA CTS NOTED ABOVE HAVE NOT BEEN DISPUTED BY BOTH THE PARTIES. THE LD. CIT(A) A CCEPTED THE TURNOVER OF THE ASSESSEE, WHICH WAS BASED ON THE SEIZED PAPERS AND THE DEPARTMENT HAS NOT CHALLENGED THE ORDER OF THE LD. CIT(A) TO THAT EXTE NT. THE ONLY QUESTION LEFT NOW FOR CONSIDERATION IS APPLICATION OF PROFIT RATE OF 10% AS AGAINST 8% DECLARED BY THE ASSESSEE. IT IS NOT A DENYING FACT THAT THE BUS INESS ACTIVITIES OF THE ASSESSEE ARE FROM UNORGANIZED SECTOR AND THE ITEMS OF THE BUSINE SS OF THE ASSESSEE ARE HIGHLY PERISHABLE. THEREFORE, THE EXPLANATION OF THE ASSES SEE IS ACCEPTABLE THAT THE PROFIT MARGIN MAY NOT BE HIGHER AS HAVE BEEN APPLIED BY TH E AUTHORITIES BELOW. THE ITA NOS.410, 411, 412 & 423/AGRA/2012 6 ASSESSEE HAS DECLARED PROFIT RATE OF 8%, BUT EQUALL Y IT IS A FACT THAT THE ASSESSEE HAS NOT MAINTAINED ANY REGULAR BOOKS OF ACCOUNT. TH EREFORE, THE PROFIT DISCLOSED BY THE ASSESSEE IS NOT SUBJECTED TO VERIFICATION AN D AS SUCH, IT WAS NECESSARY TO ESTIMATE THE PROFIT OF THE ASSESSEE. SINCE NO BASIS HAS BEEN SHOWN EITHER BY THE AO OR BY THE ASSESSEE, THEREFORE, IT WOULD BE REASO NABLE AND APPROPRIATE TO DIRECT THE AUTHORITIES BELOW TO ADOPT THE PROFIT RATE OF 9 % INSTEAD OF 10% CONFIRMED BY THE LD. CIT(A). THE ORDERS OF THE AUTHORITIES BELOW TO THAT EXTENT ARE MODIFIED AND THE AO IS DIRECTED TO WORK OUT THE PROFIT BY APPLYI NG THE PROFIT RATE OF 9% AGAINST TURNOVER AS CONFIRMED BY THE LD. CIT(A). IN THE RES ULT, GROUND NO. 1 OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE FINDINGS IN THI S ORDER ARE BASED ON THE FACTS OF THIS CASE AND SHALL NOT BE TREATED AS PRECEDENCE IN OTHER CASES. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS. 411, 412 & 423/AGRA/2012: 7. IN ALL THESE APPEALS, THE ASSESSEE CHALLENGED TH E ADDITION OF RS.1,04,371/-, RS.79,937/- & 73,507/- BY APPLYING 10% PROFIT RATE BY THE LD. CIT(A) IN ALL THESE ASSESSMENT YEARS RESPECTIVELY. SINCE THE FACTS ARE IDENTICAL IN ALL THESE APPEALS AS HAVE BEEN CONSIDERED IN ITA NO. 410/AGRA/2012, WE D IRECT THE AO TO ADOPT PROFIT RATE OF 9% AS AGAINST 10% CONFIRMED BY THE L D. CIT(A) AGAINST TURNOVER ACCEPTED BY THE LD. CIT(A) AND TO WORK OUT THE PROF ITS ACCORDINGLY. THE ORDERS OF ITA NOS.410, 411, 412 & 423/AGRA/2012 7 THE AUTHORITIES BELOW TO THAT EXTENT ARE MODIFIED. IN THE RESULT, ALL THESE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY