ACIT, UDAIPUR V. M/s. Jai International, UDAIPUR

ITA 418/JODH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5262 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 06-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MOURYA
• Keywords: Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 418 / JODH /201 4 (ASST. YEAR : 20 11 - 12 ) AC IT, CIRCLE - 2 , UDAIPUR . VS. M/S. JAI INTERNATIONAL , THIRUPATI COMPLEX, PANCHWATI, UDAIPUR. PAN NO. AAAFJ 7682 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE. DEPARTMENT BY : S HRI S.L. MOURYA - DR DATE OF HEARING : 1 0 / 0 3 /201 6 . DATE OF PRONOUNCEMENT : 1 0 / 03 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , UDAIPUR , DATED 2 0 /0 5 /201 4 . 2. THE GRIEVANCE IN GROUND NO.1 OF THE APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS. 36,52,817/ - ON ACCOUNT OF APPLICATION OF HIGHER GROSS PROFIT RATE AFTER REJECTING THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SEC. 145(3) OF THE ACT . 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS. 7,36,48,183/ - ON GROSS TURN OVER OF RS. 25,33,65,490/ - , WHICH WORKED OUT TO 29.07% AS COMPARED TO THE GROSS PROFIT RATE DECLARED AT 27.93% AND 33.09% IN THE ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 RESPECTIVELY . THE ASSESSING 2 ITA NO. 418 / JODH /201 4 OFFICER OBSERVED THAT THOUGH THE GROSS PROFIT RATE DECLARED IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS BETTER IN COMPARISON TO THE IMMEDIATE LY PRECEDING ASSESSMENT YEAR , BUT THE SAME IS LOW IN COMPARISON TO THE GROSS PROFIT RATE DECLARED IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 . THEREFORE, HE BY POINTING OUT SOME DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE REJECTED THE BOOK RESULTS AND ESTIMATED THE PROFIT FOR THE YEAR UNDER CONSIDERATION BY APPLYING THE GROSS PROFIT RATE AT 30.51% AND MA DE THE ADDITION OF RS. 36,52,817/ - 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE ASSESSING OFFICER HAS MISREAD THE FORM NO.3CB WHERE THE AUDITORS HAVE MENTIONED THAT NO DAY TO DAY QUANTITATIVE DETAIL REGISTER IS MAINTAINED . THE ASSESSEE HAS MAINTAINED PROPER STOCK REGISTER WHICH WAS SUBJECT TO FREQUE NT CHECKING BY THE EXCISE AUTHORITY WHICH IS A GOVERNMENT AGENCY . THE ASSESSEE HAS FILED COMPLETE DETAILS OF PURCHASE AND SALES ALONG WITH DETAILS OF LOADING EXPENSES . IT IS NOT A CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS INDULGED IN TRANSACTIONS OUT OF BOOKS OF ACCOUNTS . IT IS ALSO NOT A CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS INFLATED THE EXPENSES CLAIMED WITH A MALAFIDE INTENTION TO REDUCE THE TAX LIABILITY . THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS DUE TO WHICH THE TRUE AND CORRECT STATE OF AFFAIRS OF THE BUSINESS AND THE INCOME EARNED CANNOT BE D EDUCED . IN VIEW OF THIS AND COUPLED WITH THE FACT THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE DURING THE YEAR U NDER CONSIDERATION IS MUCH BETTER THAN THE GROSS PROFIT DECLARED DURING THE IMMEDIATELY PRECEDING ASSESSMENT YEAR , T HERE IS NO JUSTIFICATION IN REJECTING THE BOOKS OF ACCOUNTS MAINTAINED AND AUDITED BY THE AUTHORIZED AUDITORS WHO HAVE NOT POINTED OUT ANY SPECIFIC DEFECT IN MAINTAINING THE BOOKS OF ACCOUNTS . ACCORDINGLY, HE HELD THAT THE PROVISIONS OF SEC. 145(3) OF THE ACT ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND THE ADDITION MADE ON ACCOUNT OF APPLICATION OF HIGHER PROFIT IS DELETED. 3 ITA NO. 418 / JODH /201 4 5. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF NOTICE OF HEARING SENT TO THE ASSESSEE. 6 . WE FIND THAT DEPARTMENTAL REPRESENTATIVE HAS NOT POINTED OUT ANY SPECIFIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) . FURTHER, IT IS ALSO AN ADMITTED FACT BY THE REVENUE THAT THE GROSS PROFIT SHOWN BY THE ASSESSEE AND ACCEPTED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2010 - 11 WAS 27.93% AND THAT THE GROS S PROFIT RATE SHOWN IN THE PRESENT A SSESSMENT Y EAR 29.07% WHICH IS BETTER THAN THE GROSS PROFIT RATE OF 27.93% SHOWN IN THE ASSESSMENT YEAR 2010 - 11 . THUS, IN OUR CONSIDERED OPINION, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY HELD THAT REJECTION OF BOOKS OF ACCOUNTS UNDER SEC. 145(3) OF THE ACT WAS NOT PROPER . FURTHER, NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE FINDING S OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSEE HAS FILED COMPLETE DETAILS OF PURCHASE AND SALES ALONG WITH LOADING EXPENSES AND THE PROPER STOCK REGISTER WAS MAINTAINED BY THE ASSESSEE WHICH WAS FREQUENTLY CHECKED BY THE EXCISE AUTHORIT Y WHICH IS A GOVERNMENT AGENCY. WE, THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN SECOND GROUND OF APPEAL, THE GRIEVANCE OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 6,89,400/ - . 8. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FIRM HAS ADVANCED RS. 57,45,000/ - TO SEVEN PARTIES AND NO INTEREST WAS CHARGED FROM THEM . SINCE THE INTEREST FREE ADVANCE WAS GIVEN FOR NON - BUSINESS PURPOSE, THE ASSESSING OFFICER DISALLOWED INTEREST EXPENDITURE OF RS. 6,89,400/ - BY APPLYING THE RATE AT 12% ON 4 ITA NO. 418 / JODH /201 4 THE AMOUNT OF RS. 57,45,000/ - AS INTEREST FREE ADVANCE TO THE SEVEN PARTIES. 9. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE HAD INTEREST FREE OWN FUNDS OF RS. 2,11,93,945/ - COMPRISING OF PARTNERS CAPITAL OF RS. 1,59,13,743/ - AND INTEREST FREE UNSECURED LOANS OF RS. 52,80,202/ - . COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE, DELETED THE DISALLOWANCE OF INTEREST EXPENDITURE ON THE GROUND THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS TO MAKE INTEREST FREE ADVANCES OF RS. 57,45,000/ - TO THE SEVEN PARTIES. 10. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS IN SPITE OF ISSU ANCE OF NOTICE TO THE ASSESSEE, NONE APPEARED ON BEHALF OF THE ASSESSEE. 11. WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTROVER T THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS OF RS. 2,11,93,945/ - AVAILABLE WITH IT , OUT OF WHICH THE ASSESSEE COULD HAVE MADE INTEREST FREE ADVANCES OF RS. 57,45,000/ - . HENCE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORD E R OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON THURSDAY , THE 1 0 TH DAY OF MARCH , 201 6 AT JODHPUR . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 1 0 TH MARCH , 201 6 . 5 ITA NO. 418 / JODH /201 4 VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER .