Bishan Dayal Aggarwal, Rewari V. ITO, Rewari

ITA 432/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69544 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Rejection of books of accounts
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A: NEW DELHI) BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER ITA NO.432/DEL/ 2013 (ASSESSMENT YEAR:2009-10) BISHAN DAYAL AGGARWAL VS. ITO C/O. BISHAN DAYAN DAYAL & COMPANY, WARD-1 GURU BAZAR, MOTI CHOWK, REWARI. REWARI PAN: AALPA2096H (APPELLANT) (RESPONDENT) ASSESSEE BY : WRITTEN SUBMISSION,.(NONE) REVENUE BY : Y. KAKKAR, DR. ORDER PER C. M. GARG, J M: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-ROHTAK, VI DE DATED 12.11.2012 IN APPEAL NO- 388/RWR/2011-12 FOR THE ASSESSMENT YE AR 2009-10.THE GROUNDS RAISED BY THE ASSESSEE REDS AS UNDER: 1. THAT THE LD. CIT (A) RPHTAK HAS ERRED IN UPHOLD ING THE REJECTING OF BOOK U/S 145(3) ON THE PLEA THAT NO ST OCK REGISTER IS KEPT IGNORING THAT THE COMMODITIES WERE KEPT IN UNI T AND WEIGHT WISE. THE DETAILS CHART IS ON RECORD WITH THE TAX A UDIT REPORT AND ALSO FURNISHED DURING THE APPEAL HEARING. 2. THAT UPHOLDING THE ADDITION OF RS.516174/- BY AP PLYING THE GP @ 4% ON SALE OF RS.38532210/- BY THE LD. CIT (A) ITA NO.432/DEL/2013 2 IGNORING ALL THE FACTS, FIGURES AND SUBMISSION ON R ECORD ARE QUITE ARBITRARY AND UNJUSTIFIED. 2. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT, THE ASSESSEE IS ENGAGED IN WHOLE SALE TRADING OF ALUMINIUM GOODS AND PLYWOOD DECLARED A TOTAL INCOME OF RS.1,98,530/- ON A GP RATE OF 2.6 6% OF THE TURNOVER. THE ASSESSING OFFICER OBSERVED THAT THE DECLARED GP RAT E IN COMPARISON TO EARLIER ASSESSMENT YEAR THAT WAS A. Y. 2008-09 AND A. Y. 2007-08 WAS 2.74% AND 5.12% RESPECTIVELY. ON SPECIFIC QUERY OF THE ASSESSING OFFICER THE ASSESSEE EXPLAINED THAT THE FALL IN GP RATE WAS BASICALLY DUE TO INCREASE IN SALES BY 2.22 CRORES. THE ASSESSING OFFICER ASKE D TO PRODUCE THE STOCK REGISTER FOR THE VERIFICATION BUT THE ASSESSEE FAIL ED TO PRODUCE THE SAME. CONSEQUENTLY, THE ASSESSING OFFICER CONCLUDED THE A SSESSMENT PROCEEDINGS BY HOLDING THAT THE QUANTITY AND THE VALUE OF PURCH ASES, SALES AND CLOSING STOCK COULD NOT BE VERIFIED IN ABSENCE OF STOCK REG ISTER. THEREFORE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AND APPLIED THE GP RATE OF 4% (BEING AVERAGE GP OF THREE YEARS) AND AN ADDITI ON OF RS.5,16,174/- WAS MADE IN THIS REGARD. 3. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E CIT (A) WHICH WAS ALSO DISMISSED BY IMPUGNED ORDER. THE CIT (A) HELD THAT THE EXPLANATION OF THE ASSESSEE GIVEN FOR LOWER GP RATE WAS GENERAL IN NATURE, WITHOUT HAVING ITA NO.432/DEL/2013 3 ANY SPECIFIC AND COGENT REASONING, THEREFORE, THE C IT (A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS AND CONSEQUENTLY THE ADDITION WAS CONFIRMED. NOW THE AGGRIEVED ASSES SEE IS AGAIN BEFORE THIS TRIBUNAL IN THE SECOND APPEAL WITH THE GROUNDS AS M ENTIONED HEREINABOVE. 4. APROPOS BOTH THE GROUNDS OF THE ASSESSEES ADV. MR. M. L. GULATI, SUBMITTED AN APPLICATION FOR ADJOURNMENT BY SPEED P OST AND ENCLOSED WRITTEN SUBMISSIONS ON BEHALF OF THE ASSESSEE. IN THE ADJOU RNMENT APPLICATION IT HAS BEEN STATED THAT DUE TO KNEE REPLACEMENT OPERATION THE ASSESSEES COUNSEL IS NOT ABLE TO ATTEND COURT PROCEEDINGS. THEREFORE, ON E MONTH TIME MAY KINDLY BE GIVEN. 5. ON CAREFUL PERUSAL OF RECORD WE FIND IT APPROPRI ATE TO DECIDE THE APPEAL AFTER HEARING THE DEPARTMENTAL REPRESENTATIV E AND CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE. THEREFORE, WE PROCEED TO DECIDE THE APPEAL IN THE ABSENCE OF ASSESSEE AND HIS COUNSEL. THE WRITTEN SUBMISSION OF THE ASSESSEE PERUSED THE ARGUMENT OF LD. DEPARTMENT AL REPRESENTATIVE (DR) ALSO HEARD. IN THE WRITTEN SUBMISSIONS AS IT HAS BE EN STATED BY THE ASSESSEE THAT THE ASSESSING OFFICER REJECTED BOOKS OF ACCOUN TS OF THE ASSESSEE U/S 145(3) OF THE ACT ON WRONG AND UNJUSTIFIED REASON. IN THE WRITTEN SUBMISSIONS OF THE ASSESSEE IT HAS ALSO BEEN STATED THE BOOKS OF ACCOUNTS CANNOT BE REJECTED IN ABSENCE OF STOCK REGISTER ONL Y IF NO ANY OTHER ITA NO.432/DEL/2013 4 DISCREPANCIES IN THE RATES, SALES AND PURCHASES VER SION HAD BEEN FOUND. THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. JACSON HOUSE (2011) REPORTED IN 198 TAXMANN 385 (DEL), DECISION OF HONBLE RAJSTHAN HIG H COURT IN THE CASE OF CIT VS. RELIANCE RUBBER (2012) REPORTED IN 204 TAXM ANN 88(RAJSTHAN), THE DECISION OF HONBLE OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PATIALA DISTRICT COOPERATIVE MILLS (2010) REPORTED IN 328 ITR 613 (P & H). 6. IN THE CASE OF CIT VS JACSON HOUSE (SUPRA) HONB LE HIGH COURT OF DELHI HELD THAT WHEN THE BOOKS OF ACCOUNTS OF THE A SSESSEE WERE DULY AUDITED AND THE ASSESSING OFFICER HAD NOT POINTED OUT ANY S PECIFIC DEFECT OR DISCREPANCY THEREIN AND INCOME OF THE ASSESSEE WAS CLEARLY DISCERNIBLE FROM ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE THEN ACC OUNT OF THE ASSESSEE COULD NOT TO BE SAID TO BE DEFECTIVE OR INCOMPLETE MERELY BECAUSE THE STOCK REGISTER WAS NOT MAINTAINED IN A PARTICULAR FORM, T HE BOOKS OF ACCOUNTS CANNOT BE REJECTED ON THIS BASIS. IN THIS JUDGMENT THEIR LORD SHIP ALSO HELD THAT THE SECTION 145(3) OF THE ACT COULD NOT HAVE B EEN INVOKED BY THE ASSESSING OFFICER IN ABSENCE OF THE STOCK REGISTER. 7. IN THE CASE IN HAND, FROM THE ASSESSMENT ORDER W E CLEARLY OBSERVE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAS BEEN REJE CTED BY INVOKING PROVISIONS OF SECTION 145 (3) OF THE ACT ONLY ON TH E SOLE BASIS THAT THE ITA NO.432/DEL/2013 5 ASSESSEE FAIL TO PRODUCE STOCK REGISTER FOR VERIFIC ATION. IN VIEW OF THE ABOVE, WE HOLD THAT THE ACTION OF THE ASSESSING OFFICER IN THE REJECTING BOOKS OF ACCOUNTS BY INVOKING THE SECTION 145 (3) OF THE ACT WAS ON WRONG PREMISES AND WITHOUT ANY BASIS AND THE CIT (A) ERRED IN UPHO LDING THE SAME. ACCORDINGLY, WE ARE UNABLE TO AGREE WITH THE ACTION OF THE ASSESSING OFFICER IN THIS REGARD AND WE SET ASIDE THE FINDINGS OF THE AUTHORITIES BELOW IN THIS REGARD. 8. COMING TO THE NEXT ISSUE OF ADDITION ON THE BASI S OF AVERAGE GP RATE OF THREE YEARS FROM THE ASSESSMENT ORDER. WE OBSERV E THAT THE GP RATE OF THE ASSESSEE IN A. Y. 2008-09 WAS 2.74% WHICH WAS REDUC ED TO 2.66% DURING SUBSEQUENT YEAR UNDER CONSIDERATION I.E. A. Y. 2009 -10. FROM THE ORDERS OF THE AUTHORITIES BELOW WE CLEARLY OBSERVE THAT THE G P RATE FOR IMMEDIATELY PRECEDING YEAR (2008-09) @ 2.74% HAS BEEN ACCEPTED BY THE REVENUE AUTHORITIES BUT GP RATE AT 2.66% HAS NOT BEEN ACCEP TED DURING A. Y. 2009-10 I.E. YEAR UNDER CONSIDERATION. IN THE WRITTEN SUBMI SSIONS SUBMITTED THAT THE SALE WAS UP BY 2.22 CRORES WHICH WAS QUITE ON HIGHE R SIDE AND MORE THAN TWICE OF THE EARLIER YEAR. THEREFORE, THE GP RATE W AS LITTLE BIT DOWN BY ONLY 0.08 % WHICH WAS DUE TO FLUCTUATION OF RATES. IN TH E WRITTEN SUBMISSIONS OF THE ASSESSEE, IT HAS ALSO BEEN STATED THAT WHEN THE PURCHASES AND SALES ARE DULY ACCEPTED BY THE ASSESSING OFFICER AND ACCOUNTS ARE DULY AUDITED AND NO ITA NO.432/DEL/2013 6 ANY DEFECT OR DISCREPANCY HAS BEEN POINTED OUT IN P URCHASES OR SALES OR OTHER WISE THEN APPLICATION OF GP RATE OF 4% AND ADDITION THEREUNDER IS WITHOUT ANY BASIS. IN THE LIGHT OF THIS FACT THAT EVEN THE CLOSING STOCK VALUATION FURNISHED BY THE ASSESSEE WITH DOCUMENTARY EVIDENCE S HAS NOT BEEN DISPUTED OR REJECTED. 9. ON SPECIFIC QUERY FROM THE BENCH THE LD. DEPARTM ENTAL REPRESENTATIVE ACCEPTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED AND NO DISCREPANCY WAS POINTED OUT IN PURCH ASE AND SALE OR OTHERWISE IN THE ACCOUNTS SUBMITTED BY THE ASSESSEE BEFORE ASSESSING OFFICER. THE DEPARTMENTAL REPRESENTATIVE CLEARLY AC CEPTED THAT THE SALES OF THE ASSESSEE WAS MORE THAN DOUBLE DURING THE YEAR U NDER CONSIDERATION IN COMPARISON IMMEDIATELY PRECEDING YEAR. IN THIS FACT UAL MATRIX, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE PRECEDING YEAR GP RAT E OF 2.74% HAS BEEN ACCEPTED BY THE REVENUE AUTHORITIES THEN THE GP RAT E 2.66% WITH AN IGNORABLE DECLINE OF 0.08% DURING THE YEAR UNDER CO NSIDERATION IS REASONABLE IN THE LIGHT OF THIS SPECIFIC FACT THAT THE TURN OV ER OF THE ASSESSEE REACHED MORE THAN DOUBLE DURING THE YEAR UNDER CONSIDERATIO N IN COMPARISON TO THE IMMEDIATELY PRECEDING YEAR. ACCORDINGLY, WE HOLD TH AT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADOPTING 4% GP RATE OF THE TURN OVER AND ADDITION MADE IN THIS REGARD IS NOT SUSTAINABLE, IN THE LIGHT OF FACTUAL MATRIX ITA NO.432/DEL/2013 7 AND DISCUSSIONS MADE HEREINABOVE IN THIS ORDER. UND ER THESE CIRCUMSTANCES, WE ARE INCLINE TO SET ASIDE THE ORDER OF THE AUTHOR ITIES BELOW AND HOLD THAT THE GP DECLARED BY THE ASSESSEE CANNOT BE REJECTED BY T AKING THREE YEARS AVERAGE GP RATE IN THE LIGHT OF SUBSTANTIAL INCREASE IN THE TURNOVER OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IN COMPARISON T O THE PRECEDING YEARS. THUS GROUND NO.1 AND 2 OF THE ASSESSEE ARE ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO ACCEPT GP RATE OF 2.66% AS D ECLARED BY THE ASSESSEE. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 29 TH /11/ 2013. SD/- SD/- (S. V. MEHROTRA) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF NOVEMBER, 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.