Sh. Dwarika Prasad Gupta, Shivpuri V. I.T.O., Shivpuri

ITA 416/AGR/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67450 (ITAT-AGRA)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Assessee Lawyers: V BAPNA
• Keywords: Business income; Loose papers
• Section: 80C; 133A; 69

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. 416/AGRA/ 2012 ASSESSMENT YEAR 2006-2007 SHRI DWARIKA PRASAD GUPTA VS. INCOME TAX OFFICER PROP. DEEPAK PIPE & SANITARY STORE PHYSICAL ROAD, BADI DHARAM SHALA ROAD, SHIVPURI SHIVPURI (PAN ABKPG 9830 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.BAPNA, C.A RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 07.08.2013 DATE OF PRONOUNCEMENT : 23.08.2013 ORDER PER A.L. GEHLOT,ACCOUNTANT MEMBER: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 28.05.2012 PASSED BY THE LEARNED CIT(A), GWALIOR FO R A.Y. 2006-07. 2. THE EFFECTIVE GROUNDS RAISED IN THIS APPEAL ARE REPRODUCED AS BELOW:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CONFIRMING RS.3,43,714/- IN THE TRADING IN COME OF THE APPELLANT IS ILLEGAL UNJUSTIFIED AND BAD IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS.2,13,652/- AND R S.18,660/- U/S 69 IS ILLEGAL, UNJUSTIFIED & BAD IN LAW. 3. BRIEF FACTS OF THE CASE ARE THAT THE SURVEY UNDE R SECTION 133A OF THE ACT WAS CARRIED OUT ON 21.10.2005. DURING THE COURSE OF SURVEY AN INVENTORY OF STOCK, ITA NO.416/ AGRA./2012 A.Y. 2006-07 2 PHYSICALLY VERIFIED, INCRIMINATING LOOSE PAPERS, DO CUMENTS WERE FOUND. IT WAS NOTICED THAT THE ASSESSEE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNT. DURING THE COURSE OF SURVEY, THE VALUE OF STOCK WAS DETERMINED AT RS.2,20,395/-. A STATEMENT ON OATH WAS ALSO RECORDED ON 21.10.2005. THE A.O. C ALLED INFORMATION FROM THE BANKS, MUNICIPAL CORPORATION, LIC ETC. THE ASSESSEE HAS FILED RETURN OF INCOME UNDER SECTION 44AF DECLARING NET PROFIT @ 6.84% ON TOTAL SALE OF RS.32,25,860/- I.E. RS.2,26,649/- PLUS INTEREST INCOME RS.17,252/- . THE ASSESSEE AFTER CLAIMING REBATE UNDER SECTION 80C OF RS.77,847/- RETURNED TO TAL TAXABLE INCOME OF RS.1,60,030/- IN ADDITION TO HIS AGRICULTURAL INCOM E RS.10,800/-. THE A.O. ESTIMATED SALES BY SPLITTING ANNUAL TURNOVER INTO T WO PARTS, ONE PRE-SURVEY AND OTHER POST-SURVEY. FIRST POST SURVEY SALES HAS BEEN ESTIMATED BY TAKING OPENING STOCK FOUND IN SURVEY. TOTAL SALES OF RS.32,25,860/ - SHOWN ANNUALLY IS REDUCED BY SALES RS.5,65,878/- ON THE BASIS OF BILLS FOUND DURING SURVEY. THE CLOSING STOCK AS ON 31.03.2006 TAKEN FROM BALANCE SHEET AT RS.10,85,620/-. IN THIS G.P. IS TAKEN AT 9.45% OF WHICH CALCULATION COMES TO RS.2,5 1,368/-. ON THE BASIS OF TRADING RESULT OF PRE-SURVEY G.P. ESTIMATED ON THE BASIS OF RECAST PURCHASE ACCOUNT, THE TOTAL PURCHASES COMES TO RS.32,73,838/ -. ON THE BASIS OF CALCULATION AT DAILY BASIS THIS PURCHASES FOR FIVE MONTHS AND 1 0 DAYS I.E. 21.10.2005 TO 31.03.2006, HENCE FOR REMAINING PERIOD OF 6 MONTHS AND 20 DAYS THE PURCHASES ARE ESTIMATED AT RS.40,90,762/- AFTER APPLYING G.P. RATE OF 9.45% AND CLOSING STOCK OF RS.2,20,395/- FOUND DURING SURVEY THE G.P. ESTIMATED AT RS.4,66,443/-. ITA NO.416/ AGRA./2012 A.Y. 2006-07 3 THEREAFTER THE A.O. RECAST THE CONSOLIDATED TRADING ACCOUNT FOR THE WHOLE YEAR AND APPLY G.P. 9.45% AND CALCULATE G.P. OF RS.7,17, 811/- AS AGAINST G.P. DECLARED BY THE ASSESSEE RS.2,20,649/-. THE CIT(A) ALLOWED RELIEF OF RS.1,95,547 /- AS UNDER :- (CIT(A) PAGE NO.5) THUS, AO IS FOUND JUSTIFIED IN ESTIMATING SALES AT RS.80,62,3,338/- ON THE BASIS OF BILLS/DETAILS FOUN D DURING SURVEY. HOWEVER, ESTIMATION SALES AT RS.80,62,3338/- ON THE SE SALES IS NOT FOUND SUSTAINABLE. THE APPELLANT HAS DECLARED NET P ROFIT @ 7.34% AND 6.52% DURING LAST 2 YEARS AS COMPARED TO 6.84% THIS YEAR. FURTHER, VIDE SHOW CAUSE DT. 20.11.2008. AO HIMSELF HAS PROP OSED NET PROFIT RATE OF 7% WHICH HAS BEEN TAKEN @9.45% WHILE COMPUTING I NCOME WITHOUT ANY JUSTIFICATION OR REASON. NO COMPARABLE CASE HAS ALSO BEEN MENTIONED BY THE AO JUSTIFYING APPLICATION OF NET P ROFIT RATE OF 9.45% WHICH, IN FACT, IS SAME AS GROSS PROFIT RATE OF THE APPELLANT. AFTER MAKING ALLOWANCE FOR EXPENSES & PAST HISTORY OF THE APPELLANT, NET PROFIT RATE OF 7% IS FOUND REASONABLE & JUSTIFIED. ACCORDINGLY, BUSINESS INCOME OF THE APPELLANT IS COMPUTED AT RS.5,64,363/ - (7% OF SALES OF RS.80,62,333/-) IN PLACE OF RS.7,61,890/- ASSESSED BY THE AO. THE APPELLANT GETS RELIEF OF RS.1,97,527/- ON THIS GROU ND ACCORDINGLY. 4. WE HAVE HEARD LEARNED REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE A.O. HAS ESTIMATED SALES OF RS.80,62,3 33/- AS AGAINST SALES DECLARED BY THE ASSESSEE RS.32,25,860/-. THE ASSESS EE ENGAGED IN BUSINESS OF RETAIL TRADE IN SANITARY GOODS AND BATHROOM FITTING S. THE CIT(A) FOUND THAT THE A.O. IS CORRECTLY ESTIMATED SALE OF RS.80,62,333/-. HOWEVER, THE CIT(A) FOUND THAT THE NET PROFIT RATE SHOULD BE 7% IS REAS ONABLE. WE NOTICE THAT IN SPITE OF SURVEY THE A.O. INSTEAD OF CALCULATING SAL ES ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S URVEY, HE WENT ON ESTIMATING THE SALE WHICH IS NOT CORRECT PROCEDURE PARTICULARLY WHEN THE ITA NO.416/ AGRA./2012 A.Y. 2006-07 4 REVENUE HAS CARRIED OUT SURVEY UNDER SECTION 133A O F THE ACT. THUS, WE FOUND THAT THE A.O. AND CIT(A) BOTH ARE NOT CORRECT IN ESTIMATING SALE OF RS.80,62,333/-. THE ASSESSEE FURNISHED COMPARATIVE POSITION OF THE NET PROFIT AND SALE AS UNDER :- A.Y. 2003-04 2004-05 2005-06 YEAR ENDED 31.03.2003 31.03.2004 31.03.2005 -------------------------------------------- RETURN FILED U/S. 44AF 44AF 44AF -------------------------------------------- SALES 1540699 2218704 2517454 NET PROFIT 113084 124516 127131 5. ON EXAMINATION OF COMPARATIVE POSITION, WE NOTIC E THAT FOR THE YEAR 31.03.2003 THE ASSESSEE HAS SHOWN SALE OF RS.25,17, 454/- WHEREAS IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN SALE OF RS.32,25,860/-. THE ASSESSEE HAS SHOWN HIGHER SALE IN COMPARISON TO LAS T YEAR. ON PERUSAL OF COMPARATIVE POSITION OF SALE, WE NOTICE THAT SALE O F RS.80,62,333/- NEVER DECLARED BY ASSESSEE IN THE PAST. THIS FACT POINTED OUT BY THE ASSESSEE THAT THE SALES RS.15,36,200/- AND RS.7,36,910/- MADE TO THE MUNCIPAL CORPORATION DID NOT PERTAIN TO THE ASSESSMENT YEAR UNDER CONSIDERAT ION ARE FOUND ACCEPTABLE. HOWEVER, WE NOTICE THAT THE ESTIMATION IS ARBITRARY WITHOUT CONSIDERING THE RELEVANT FACTS OF THE CASE. SINCE THE ASSESSEE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNT, THEREFORE, TO COVER UP THE DEFICIENCY WE F IND IT WILL BE FAIR AND REASONABLE TO CONSIDERING THE PAST HISTORY OF THE A SSESSEE. AFTER CONSIDERING PAST HISTORY WE ESTIMATE TURNOVER OF RS.40,00,000/- AND AFTER APPLYING THE NET ITA NO.416/ AGRA./2012 A.Y. 2006-07 5 PROFIT RATE OF 7% THE CALCULATION COMES TO RS.2,80, 000/- AGAINST PROFIT DECLARED BY THE ASSESSEE RS.2,26,649/-. THUS ADDITION TO THE EXTENT OF RS.53,351/- IS WARRANTED WE ACCORDINGLY SUSTAINED THE ADDITION TO THE EXTEND OF RS.53,351/-. WE ACCORDINGLY MODIFY ORDER OF THE CIT(A) AND A.O. AND SUSTAIN THE ADDITION OF RS.53,351/- AND THE A.O. IS DIRECTED TO TAKE THE TOTAL PROFIT OF RS.2,80,000/- AS AGAINST PROFIT DECLARED BY THE ASSESSEE RS.2,26, 649/-, IN PLACE OF PROFIT ESTIMATED BY THE CIT(A) RS.5,64,363/- AND RS.7,61,8 90/- ESTIMATED BY THE A.O. THE A.O. IS DIRECTED ACCORDINGLY. 6. THE SECOND GROUND IS PERTAINING TO ADDITION OF R S.2,72,994/- AND RS.18,660/- MADE UNDER SECTION 69 OF THE ACT. DURIN G THE ASSESSMENT PROCEEDINGS, A.O. CALLED THE INFORMATION FROM THE B ANK AND NOTICE THAT A DEBIT BALANCE OF RS.2,72,994/- HAS BEEN SHOWN BY THE BANK OF INDIA IN THE ACCOUNT OF THE ASSESSEE AGAINST WHICH THE ASSESSEE HAS SHOW N CREDIT BALANCE OF RS.4,86,646/-. SIMILARLY IN ORIENTAL BANK OF COMMER CE ACCOUNT CREDIT BALANCE OF RS.18,660/- WAS SHOWN BY THE BANK IN ASSESSEES ACCOUNT AS ON 31.03.2006 WHEREAS THE ASSESSEE DID NOT DECLARE THIS ACCOUNT I N THE BALANCE SHEET. IN ABSENCE OF RECONCILIATION, THE A.O. MADE THE ADDITI ON OF RS.2,72,994/- AND RS.18,660/-. THE CIT(A) PARTLY ALLOWED RELIEF AS UN DER :- (CIT(A) PAGE NO.7) THUS THE APPELLANT HAS FAILED TO RECONCILE THE DIF FERENCE SHOWN IN HIS BANK ACCOUNT. EVEN THE SUBMISSIONS MADE IN RESP ECT OF BANK OF INDIA DURING THE COURSE OF APPEAL PROCEEDINGS HAVE NOT BEEN SUPPORTED WITH ANY DOCUMENTARILY EVIDENCE WHATSOEVE R BUT HAVE STATED TO BE RECEIPTS FROM SALE PROCEEDS/KATTHA MIL LS & SUBSEQUENT ITA NO.416/ AGRA./2012 A.Y. 2006-07 6 WITHDRAWAL OF RS.50,000/- AGAIN UNSUPPORTED IN ABSE NCE OF ANY CASH BOOK OR CASH FLOW STATEMENT. SIMILARLY FOR ORI ENTAL BANK OF COMMERCE BANK ACCOUNT, NO RECONCILIATION HAS BEEN S UBMITTED & THE BALANCE IS MERELY STATED TO BE PART OF CASH & B ANK BALANCE IN THE BALANCE SHEET WHICH IS NOT FOUND ACCEPTABLE IN THE ABSENCE OF CASH BOOK OR CASH FLOW STATEMENT. THUS THE ADDITION MADE BY THE AO FOR DIFFERENCE IS OF RS.2,13,652/- (RS.4,86,646- 2,72,994) ONLY AS AGAINST INADVERTENT ADDITION FOR THE SAID DIFFER ENCE AT RS.2,72,994/- MADE BY THE AO, WHICH, IN FACT, REPRE SENTS THE CLOSING BALANCE AS PER THE BANK STATEMENT. THUS, AD DITION OF RS.2,13,652/- & RS.18,660/- IS, HEREBY, CONFIRMED. 7. THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNT. THE ASSESSEE FILED THE RETURN ON PRESUMING TAX UNDER THE PROVISION OF SECTION 44AF. IT WAS EXPLAINED BY THE ASSESSEE THAT BALANCE OF RS.18,660/- IN ORIENTAL BANK OF COMMERCE BANK ACCOU NT THE ASSESSEE HAS SHOWN THIS AMOUNT AS CASH AND BANK BALANCE AS ON 31.03.20 06 TOTALLING AMOUNT OF RS.42,518/-. THUS, THE AMOUNT OF RS.42,518/- INCLUD ES THE BALANCE OF OBC AMOUNT OF RS.18,660/- IN RESPECT OF BANK OF INDIA A CCOUNT. THE SUBMISSION OF THE ASSESSEE ISAS UNDER :- (CIT(A) PAGE NO.6) AS REGARDS A/C OF BANK OF INDIA, THE BALANCE HAS B EEN REDUCED FROM RS.4,86,646/-, BECAUSE OF FOLLOWING CREDITS IN THIS A/C. 31.03.06 6,042/- RECEIVED FROM KATHA MILL 23.03.06 5,821/- RECEIVED FROM KATHA MILL 29.03.06 6,101/- RECEIVED FROM KATHA MILL 31.03.06 2,50,000/- RECEIVED FROM KATHA MILL IN FACT THE A/C OF SOMA ENTERPRISES WERE FILED FOR JUSTIFY SALE WHEREIN THIS CHEQUE IS APPEARING IN THE A/C. 8. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND PERUSAL OF ORDERS OF REVENUE AUTHORITIES, WE FIND THAT IT IS A CASE OF E STIMATION OF PROFIT. IT IS ADMITTED ITA NO.416/ AGRA./2012 A.Y. 2006-07 7 FACTS THAT THE ASSESSEE WAS NOT MAINTAINING REGULAR BOOKS OF ACCOUNT. THUS, IT IS NOT FAIR THAT ON THE ONE HAND THE FINANCIAL STATEME NT PREPARED BY THE ASSESSEE ARE REJECTED AND ON THE ONE HAND AFTER REJECTING FINANC IAL STATEMENT MADE ADDITION ON ACCOUNT OF DIFFERENCE IN BANK ACCOUNT SHOWN IN BALA NCE SHEET AND AS PER BANKS. THE ASSESSEE HAS EXPLAINED THE REASON OF DIFFERENCE WHICH IS CORRECT AS UNDER CIRCUMSTANCES THE ASSESSEE DID NOT MAINTAIN PROPER BOOKS OF ACCOUNT AND FOR THE PURPOSE OF MEMORANDUM SUCH CASH AND BANK BALANCE IS SHOWN. SIMILARLY IN RESPECT OF BANK OF INDIA, THE ASSESSEE HAS EXPLAINE D VARIOUS REASONS. ONE OF THE ADMITTED REASON IS THAT AS PER BALANCE SHEET THE AS SESSEE HAS SHOWN CASH DEPOSIT IN BANK WHEREAS CASH HAS BEEN WITHDRAWN RS.50,000/- ON 30.03.2006. SIMILAR IS EXPLANATION REGARDING CHEQUE RECEIVED FROM SOMA ENT ERPRISES. 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS AND AS STA TED ABOVE THAT WHEN THE A.O. IS ESTIMATING THE PROFIT REJECTING THE FINANCI AL STATEMENT AND BOOKS OF ACCOUNT, THE REJECTED FINANCIAL STATEMENT AND BOOKS OF ACCOUNT CANNOT BE CONSIDERED FOR MAKING ADDITION PARTICULARLY WHEN TH E ASSESSEE HAS FURNISHED THE NECESSARY EXPLANATION AND IT HAS BEEN SHOWN THAT TH E MEMORANDUM BALANCE SHEET PREPARED ON THE BASIS OF INCORRECT ACCOUNTING ENTRI ES THAT THE CASH WAS NOT DEPOSITED IN BANK BUT IN FACT THE CASH WAS WITHDRAW N BY MISTAKE IN ACCOUNTING ENTRIES, THE BALANCE SHEET IS BOUND TO BE IN CORREC T PRESENTATION. EVEN OTHERWISE ALSO SECTION 69 OF THE ACT IS NOT APPLICABLE AS SEC TION 69 OF THE ACT REQUIRES THAT WHEREIN THE FINANCIAL STATEMENT PROCEEDING ASSESSME NT YEAR. THE ASSESSEE MADE ITA NO.416/ AGRA./2012 A.Y. 2006-07 8 INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM. IT IS ADMITTED FACT IN THE CASE UNDER CONSIDER ATION, THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT. UNDER THE CIRCUMSTANCES, SECTION 69 OF THE ACT ITSELF IS NOT APPLICABLE. 10. IN THE LIGHT OF THE FACT, WE DELETE THE ADDITIO N OF RS.2,13,652/- AND RS.18,660/- SUSTAINED BY THE CIT(A). 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT.) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTA NT MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY