SHRI NIRMAL KUMAR GOLECHA, Ujjain V. THE ITO WARD 2(2), Ujjain

ITA 424/IND/2015

• Counselvise Citation: 42422714 RSA 2015
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 424/IND/2015 A.Y. : 2006-07 MR.NIRMAL KUMAR GOLECHA, ITO, WARD 2(2), PROP. OF RAJAL OIL INDUSTRIES, VS. UJJAIN 12,BHAGAT SINGH PATH, BARNAGAR APPELLANT RESPONDENT PAN NO. ABOPG0056D A PPELLANT S BY : SHRI PAWAN VED, ADV. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 27.02.2015 FOR THE ASSESSM ENT YEAR 2006-07. DATE OF HEARING : 03.12. 2015 . DATE OF PRONOUNCEMENT : 21 . 1 2 .2015 SHRI NIRMAL KUMAR GOLECHA, BARNAGAR VS. ITO WARD 2( 2), UJJAIN. I.T.A.NO. 424/IND/2015 A.Y. 2006-07 2 2 2. THE EFFECTIVE GROUND IN THIS APPEAL IS GROUND NO.2 WHICH READS AS UNDER :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN COMPUTING THE BUSINESS INCOME OF THE APPELLANT AT RS. 2,89,237/- BY APPLYING THE NET PROFIT RATE @ 5.0 % TO THE ENTIRE SALE SO FRS. 57,84,749/- ( RS. 46,70,133/- FROM MANUFACTURING BUSINESS SALES + RS. 11,14,616/- FROM RETAIL BUSINESS SALES FOUND DURING THE COURSE OF SURVEY U/S 133A. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND DERIVING INCOME FROM MANUFACTURING O F OIL AND KHALI. THE ASSESSEE FILED ITS RETURN OF INCOME DECL ARING TOTAL INCOME OF RS. 88,126/-, WHILE THE AO HAS ADOPTED NE T PROFIT @ 5% ON THE GROSS SALES. THEREFORE, THE ASSESSEE IS I N APPEAL BEFORE ME. LD. AUTHORIZED REPRESENTATIVE HAS FILED WRITTEN SUBMISSION WHICH IS REPRODUCED BELOW :- THE ASSESSEE HAD TWO BUSINESSES: ONE IS RUNNING A N OIL MILL AND OTHER IS RETAIL BUSINESS OF VARIOUS ITEMS. THE ROI WAS FILED ON 26-10-06; SHOWING THEREIN ONLY OIL MILL BUSINESS INCOME. RETAIL SHRI NIRMAL KUMAR GOLECHA, BARNAGAR VS. ITO WARD 2( 2), UJJAIN. I.T.A.NO. 424/IND/2015 A.Y. 2006-07 3 3 BUSINESS INCOME WAS BY MISTAKE NOT SHOWN. THEREFORE RETURN OF INCOME WAS REVISED ON 31-10-07 SHOWING EXTRA INCOME FROM RETAIL TRADE AT 55,731/- BEING 5% OF TOTAL TURNOVER AS PER SECTION 44AF. THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS IN RESPECT OF OIL MILL BUSINESS WHICH WERE DULY AUDITE D AND NO DEFECT WAS FOUND THEREIN AS PER LAO. IN RESPECT OF TRADING BUSINESS, THE ASSESSEE HAD SHOWN PROFIT ON THE BASI S OF SECTION 44AF @ 5%. THIS WAS IN ACCORDANCE WITH SECTION 44AF(4) WHI CH CLEARLY PROVIDES THAT RETAIL BUSINESS WILL BE IN AD DITION TO ANY OTHER BUSINESS. IN THE OIL MILL BUSINESS, THE NET P ROFIT WAS SHOWN AT 1.93% WHICH WAS BETTER THAN THE NP RATE OF EARLI ER FIVE YEARS VIDE PAGE 11 PARA 22 OF CIT(A) ORDER WHICH WAS NOT DISPUTED EITHER BY AO OR BY CIT(A). THE AO REJECTED BOOKS OF ACCOUNTS OF ENTIRE BUSINESS ON THE GROUND THAT RETAIL BUSINESS RELATED BOOKS OF ACCOUNTS WERE NOT MAINTAINED. THIS WAS CONFIRMED BY LEARNED C1T(A) THOUGH HE SHOULD HAVE FOLLOWED THE DECISION OF HON'BLE ITAT IN THE CASE OF GOLANI BROTHERS VS. ACIT ITAT P UNE 70 TIJ 887 CITED BEFORE HIM WHICH HE DID NOT FOLLOW WITHOU T MENTIONING ANY REASON IN HIS ORDER.THIS WAS WRONG BECAUSE THER E IS NO PROVISION FOR MAINTAINING BOOKS OF ACCOUNTS IN RESP ECT OF RETAIL BUSINESS U/S 44AF. AS REGARDS OIL MILL BUSINESS, BO OKS OF ACCOUNTS WERE DULY MAINTAINED AND AUDITED ALSO; WHI CH WAS NOT DISPUTED BY THE AO. FURTHER THE AO DID NOT TAKE ANY REMEDIAL SHRI NIRMAL KUMAR GOLECHA, BARNAGAR VS. ITO WARD 2( 2), UJJAIN. I.T.A.NO. 424/IND/2015 A.Y. 2006-07 4 4 ACTION FOR HIGHER NP RATE IN EARLIER YEAR.(7) THE L AO WAS NOT RIGHT IN REJECTING OIL MILL RELATED BOOKS OF ACCOUNTS WIT HOUT POINTING OUT ANY MISTAKE THEREIN. IT MAY BE NOTED THAT IN RESPEC T OF SUCH BUSINESS, THE ASSESSEE HAD MAINTAINED DETAILED QUAN TITY ACCOUNTS ALSO. IT IS TRITE LAW THAT IF QUANTITY REC ORDS ARE MAINTAINED, BOOKS OF ACCOUNTS CANNOT BE REJECTED. E VEN IF THE LAO IS RIGHT IN REJECTING BOOKS OF ACCOUNTS, THE NP RATE ESTIMATED WAS NOT JUSTIFIED AS DISCUSSED IN PARA 4 ABOVE. HE SHOULD HAVE FOLLOWED NP RATE OF EARLIER YEARS. THE LAO WAS WRO NG IN STATING THAT THERE WAS CONSOLIDATED TRADING AND PROFIT AND LOSS ACCOUNT OF OIL MILL BUSINESS AND RETAIL BUSINESS. THIS ACCO UNT WAS ONLY IN RESPECT OF OIL MILL BUSINESS. THE LEARNED CIT(A) C ONFIRMED BY REJECTION OF BOOKS ON THE GROUND OF DIARY SEIZED IN RELATION TO TRADING BUSINESS. THE LEARNED CLT(A) WAS ALSO WRONG IN ESTIMATING NET PROFIT RATE OF 5% ON THE GROUND THAT ASSESSEE HIMSELF HAD SHOWN 5% NET PROFIT ON RETAIL SALE. THE LEARNED CIT(A) WAS WRONG IN ADOPTING NET PROFIT RATE OF 5% IN OIL MILL BUSINESS ON THE BASIS OF RETAIL TRADE BUSINESS WHICH ARE NOT CO MPARABLE. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE HAD AL READY SHOWN ADDITIONAL INCOME IN AY 07-08 WHICH CAN BE ATTRIBUTED TO HAVE BEEN EARNED IN THIS YEAR. SHRI NIRMAL KUMAR GOLECHA, BARNAGAR VS. ITO WARD 2( 2), UJJAIN. I.T.A.NO. 424/IND/2015 A.Y. 2006-07 5 5 4. THE LD. DR OBJECTED TO THE SUBMISSION OF THE ASSESS EE ON THE GROUND THAT THE ASSESSEE HAS TWO BUSINESS OF MANUFACTURING OF OIL AND KHALI FROM SARSON, ALSI AN D KAPASIYA. THE ASSESSEE ALSO PURCHASED COTTON SEED FROM COTTON GINNING MILLS AND THROUGH PROCESS OF KHALI AND OIL CAKE, OI L ARE EXTRACTED. THERE WAS SURVEY U/S 133 OF THE ACT AND DURING THE COURSE OF SURVEY, THE ASSESSEE HAS ADMITTED THAT HE WAS INDULGING IN BUSINESSES OF SELLING VANASPATI GHEE, KIRTI BRAND SOYA REFIND OIL PACKED TIN GROUNDNUT OIL ETC. THEREFORE, HE HAS ADMITTED 5% NET PROFIT ON THE RE TAILS ALES OUT OF BOOKS AND, THEREFORE, THE AO HAS TAKEN 5% ON ALL HIS BUSINESS. THEREFORE, THE REVENUE AUTHORITIES IS JUS TIFIED. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE ASSESSEE HAD ADMITTED THAT HE WAS CARRYING OUT SALES OUT OF BOOKS. THEREFORE, THE AO HAS REJECTED THE BOOK R ESULT LU/S 145(3) OF THE ACT AND CIT(A) HAS CONFIRMED THE ACTI ON OF THE AO FOR REJECTING BOOK RESULT U/S 145(3) OF THE ACT AND OUR INTERFERENCE IS NOT REQUIRED. SHRI NIRMAL KUMAR GOLECHA, BARNAGAR VS. ITO WARD 2( 2), UJJAIN. I.T.A.NO. 424/IND/2015 A.Y. 2006-07 6 6 6. IN RESPECT OF GROUND NOS. 2 & 3, THE AO AND THE LD. CIT(A) HAS ADOPTED THE RATE OF NET PROFIT @5% ON EN TIRE SALES, WHILE THE ASSESSEE CLAIMED THAT 5% WAS ADOPTED ONLY ON ESCAPED TURNOVER. THE ASSESSEE HAD TWO BUSINESSES A ND OUT OF TWO BUSINESS, THIS BUSINESS WHICH IS IN RESPECT OF RETAIL BUSINESS U/S 44AF, WHEREIN THE ASSESSEE IS NOT REQU IRED TO MAINTAIN THE BOOKS. THE ASSESSEE HAD SUBMITTED THE CHART IN RESPECT OF MANUFACTURING BUSINESS, WHICH IS AT PAGE 11 OF CIT(A)S ORDERS, WHICH IS REPRODUCED AS UNDER :- ASSESSMENT YEAR NET PROFIT RATE (%) 2002 - 03 1.11 % 2003 - 04 1.44 % 2004 - 05 1.25 % 2005 - 06 1.68% 7. FROM THE ABOVE COMPARISON, THE ASSESSEE WAS SHOWING NET PROFIT AT LOWER LEVEL, BUT IN THE INTER EST OF JUSTICE AND FAIR PLAY, ONE HAS TO ESTIMATE THE NET PROFIT A ND THERE WAS SURVEY ALSO. THEREFORE, WE ADOPT 3 % NET PROFIT AND AO IS DIRECTED ACCORDINGLY. SHRI NIRMAL KUMAR GOLECHA, BARNAGAR VS. ITO WARD 2( 2), UJJAIN. I.T.A.NO. 424/IND/2015 A.Y. 2006-07 7 7 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 21 ST DECEMBER, 2015. SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 21 ST DECEMBER, 2015. CPU* 3.12.