Sh. Prem Chand, New Delhi V. ITO, New Delhi

ITA 4126/DEL/2010

• Counselvise Citation: 412620114 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 30-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S MINSHAS
• Keywords: Gross profit estimation
• Section: 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH F FF F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.4126/DEL/2010 4126/DEL/2010 4126/DEL/2010 4126/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007- -- -08 0808 08 SHRI PREM CHAND, SHRI PREM CHAND, SHRI PREM CHAND, SHRI PREM CHAND, 10519/1, GALI NO.4, 10519/1, GALI NO.4, 10519/1, GALI NO.4, 10519/1, GALI NO.4, MOTIA KHAN, PAHARGAN MOTIA KHAN, PAHARGAN MOTIA KHAN, PAHARGAN MOTIA KHAN, PAHARGANJ, J,J, J, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 055. 110 055. 110 055. 110 055. PAN : ACQPC0858A. PAN : ACQPC0858A. PAN : ACQPC0858A. PAN : ACQPC0858A. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -39(4), 39(4), 39(4), 39(4), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL AGARWAL, ADVOCATE. RESPONDENT BY : SHRI J.S.MINSHAS, DR. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A)-XXVIII, NEW DELHI DATED 29 TH JUNE, 2010 FOR THE AY 2007- 08. 2. IN HIS APPEAL, AS MANY AS TWELVE GROUNDS ARE RAI SED BY THE ASSESSEE. HOWEVER, AT THE TIME OF HEARING BEFORE U S, IT IS STATED BY THE LEARNED COUNSEL THAT THE MAJOR DISPUTE IN THIS APPE AL IS WITH REGARD TO THE ADDITION MADE UNDER SECTION 68 OF THE INCOME-TA X ACT, 1961 AMOUNTING TO ` 72,00,500/- AND ADDITION ON ACCOUNT OF LOW GROSS PR OFIT AMOUNTING TO ` 4,66,500/-. HE STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 24.12.2009, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE ALL THE CREDITORS ON 29.12. 2009 ALONGWITH THEIR BOOKS OF ACCOUNT, BANK STATEMENTS AND OTHER DOCUMEN TARY EVIDENCE IN SUPPORT OF THEIR HAVING GIVEN LOAN TO THE ASSESSEE. THAT THE TIME OF JUST LESS THAN A WEEK ALLOWED BY THE ASSESSING OFFI CER WAS INADEQUATE ITA-4126/DEL/2010 2 TO PRODUCE THE CREDITORS. HE SUBMITTED THAT IF THE MATTER IS SET ASIDE, THE ASSESSEE IS READY TO PRODUCE THE CREDITORS BEFO RE THE ASSESSING OFFICER. 3. WITH REGARD TO THE ADDITION FOR GROSS PROFIT ALS O, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS NO T PROPERLY APPRECIATED THE FACTS. HE ALSO SUBMITTED THAT THE FACTUAL FINDING OF THE ASSESSING OFFICER WITH REGARD TO SHARP DECLINE IN T HE GROSS PROFIT RATE IS INCORRECT. THE LEARNED COUNSEL STATED THAT IF A CH ANCE IS GIVEN TO THE ASSESSEE, HE WILL BE ABLE TO BRING THE CORRECT FACT S ON RECORD BEFORE THE ASSESSING OFFICER AND ESTABLISH THAT THE GROSS PROF IT DISCLOSED BY THE ASSESSEE IS REASONABLE AND THAT THE ASSESSEE HAS MA INTAINED REGULAR AND PROPER BOOKS OF ACCOUNT WHICH SHOULD BE ACCEPTE D. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF AUTHORITIES BELOW AND STATED THAT ADEQUATE OPPORTUN ITIES WERE ALLOWED TO THE ASSESSEE AND, THEREFORE, THE ADDITIONS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LEARNED CIT(A) SHOULD BE S USTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE MAJ OR ADDITION IS WITH REGARD TO CASH CREDIT. THE RELEVANT FINDING OF THE ASSESSING OFFICER AT PAGE 3 OF THE ASSESSMENT ORDER READS AS UNDER:- THEREFORE, NOW THE ONUS WAS ON THE ASSESSEE TO PRO VE THE GENUINENESS AND EXISTENCE OF THE ALLEGED CASH CREDI TORS M/S GARG ASSOCIATES, SHRI UMESH GARG, AND M/S SUGAN DH SPICES. THE ASSESSEE WAS THEREFORE, REQUIRED ON 24.12.2009 TO PRODUCE ALL THESE THREE PARTIES ON 29.12.2009 AND AGAIN ON 30.12.2009 ALONG WITH THEIR BOOKS OF ACCOUNTS, BANK STATEMENTS AND OTHER ITA-4126/DEL/2010 3 DOCUMENTARY EVIDENCE IN SUPPORT OF THEIR HAVING GIV EN LOAN TO SHRI PREM CHAND. HOWEVER, THE ASSESSEE FAI LED TO PRODUCE THE ABOVE MENTIONED ALLEGED CASH CREDITORS AND IN TURN FAILED TO PROVE THE GENUINENESS AND EXISTENCE OF THE ALLEGED CASH CREDITORS M/S GARG ASSOCIATES, SHRI UM ESH GARG, AND M/S SUGANDH SPICES. 6. FROM THE ABOVE, IT IS EVIDENT THAT ON 24.12.2009 , THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE CREDITORS ON 29.12.2009 AND AGAIN ON 30.12.2009. THUS, THE TOTAL TIME ALLOWED BY THE ASSESSING OFFICER IS ONLY SIX DAYS. IN OUR OPINION, THE SAME CANNOT BE SAID TO BE AN ADEQUATE OPPORTUNITY. 7. WITH REGARD TO THE TRADING ADDITION OF ` 4,66,500/-, THE FINDING OF THE ASSESSING OFFICER IS AS UNDER:- IT IS NOTICED THAT THE AVERAGE GP RATE VARIES FROM 3.7% IN FEBRUARY, 2007 TO 15% IN NOVEMBER, 2006. THE ABNOR MAL VARIATION IN THE GP RATE WITHIN THE CURRENT YEAR, S HARP DECLINE IN GP RATE FROM 15.34% IN THE PREVIOUS YEAR TO 8.1% IN THE CURRENT YEAR AND THE FACT THAT COMPLETE BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE IS A VALID REASON FOR REJECTING THE TRADING RESULTS SHOWN BY T HE ASSESSEE. TAKING INTO ACCOUNT ALL THE ABOVE MENTIO NED FACTS IT WILL BE JUSTIFIABLE TO APPLY GP RATE OF 11 .51% BY INCREASING THE GP RATE AS SHOWN BY 3.5%. THEREFORE , A TRADING ADDITION OF RS.4,66,500/- IS TO BE MADE TO THE DECLARED INCOME OF THE ASSESSEE ON ACCOUNT OF SHOWI NG LOW GP RATE, SINCE THE ASSESSEE HAS CONCEALED PARTI CULARS OF INCOME ON FURNISHED INACCURATE PARTICULARS OF HI S INCOME IN TERMS OF SECTION 271(1)(C) OF THE INCOME TAX ACT RELATING ITA-4126/DEL/2010 4 THE TRADING RESULTS OF HIS BUSINESS, IT IS HELD THA T IT IS A FIT CASE FOR IMPOSING PENALTY U/S 271(1)(C) OF THE INCO ME TAX ACT, 1961. 8. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER MADE THE ADDITION MERELY ON THE GROUND OF LOW GROSS PROFIT R ATE. IN OUR OPINION, THE LOW GROSS PROFIT RATE CAN BE A REASON FOR MAKIN G AN ENQUIRY BUT, IT CANNOT BE THE SOLE BASIS FOR MAKING THE ADDITION. THE TRADING RESULT CAN BE REJECTED ONLY IF THE CONDITION PRESCRIBED UN DER SECTION 145 FOR THE REJECTION OF BOOKS OF ACCOUNT OR THE METHOD OF ACCOUNTING IS FULFILLED. THE ASSESSING OFFICER HAS NOT RECORDED THE FINDING THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REQUIRED TO BE REJECTED IN TERMS OF SECTION 145. HOWEVER, SINCE WE ARE SETTING ASID E THE ISSUE RELATING TO CASH CREDIT, WE DEEM IT PROPER TO SET ASIDE THE ORDER OF THE ASSESSING OFFICER WITH REGARD TO GROSS PROFIT ADDIT ION ALSO. THE ASSESSING OFFICER WILL EXAMINE THE ASSESSEES BOOKS OF ACCOUNT AND IF HE FINDS THAT THE BOOKS ARE LIABLE TO BE REJECTED A S PER THE PROVISIONS OF SECTION 145, THEN ONLY, HE WILL PROCEED TO REJECT T HE TRADING RESULT AND ESTIMATE THE GROSS PROFIT AT A REASONABLE AND FAIR RATE. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER WILL ALLOW ADEQU ATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 9. IN THE RESULT, THE ASSESSEES APPEAL IS DEEMED T O BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2012. SD/- SD/- ( (( (RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDEN VICE PRESIDEN VICE PRESIDEN VICE PRESIDENT TT T DATED : 31.08.2012 VK. ITA-4126/DEL/2010 5 COPY FORWARDED TO: - 1. APPELLANT : SHRI PREM CHAND, SHRI PREM CHAND, SHRI PREM CHAND, SHRI PREM CHAND, 10519/1, GALI NO.4, 10519/1, GALI NO.4, 10519/1, GALI NO.4, 10519/1, GALI NO.4, MOTIA KHAN, PAHARGANJ, MOTIA KHAN, PAHARGANJ, MOTIA KHAN, PAHARGANJ, MOTIA KHAN, PAHARGANJ, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 055. 110 055. 110 055. 110 055. 2. RESPONDENT : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -39(4), NEW DELHI. 39(4), NEW DELHI. 39(4), NEW DELHI. 39(4), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR