Gurpreet Singh, Ludhiana V. DCIT Circle-II, Ludhiana

ITA 437/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73581 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.437 /CHD/2013 ASSESSMENT YEAR : 2009-10 GURPREET SINGH, VS. THE D.C.I.T., PROP.SHRI GURU NANAK DEV ENGINEERS, CIRCLE-II, 645, INDUSTRIAL AREA B, LUDHIANA. LUDHIANA. PAN: ABTPS8201M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 06.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, LUDHIANA DA TED 12.02.2013 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1(A) THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMI NG THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS. 1(B) THAT THE LEARNED CIT(A), THOUGH REJECTING FIND INGS OF THE ASSESSING OFFICER THAT BOOKS OF ACCOUNTS CANNOT BE MERELY REJECTED ON THE BASIS OF NOT MAINTAINING QUANTITATIVE STOCK OF GOODS, HAS ERRED IN GIVING HIS OWN FINDING THAT DURING THE COURSE OF SEARCH THE STOCKS OF THE ASSESSEE WAS FOUND SHORT/NEGATIVE AND AS SUCH ASSESSEE HAS NOT BEEN MAINTAINING BOOKS OF ACCOUNTS ON REGULAR BASIS. 1(C) THAT THE LEARNED CIT(A) HAS ERRED IN REJECTING BOOKS OF ACCOUNT MERELY ON ASSUMPTION, BY DRAWING INFERENCES WITHOUT FINDING A NY SPECIFIC DISCREPANCY IN THE PROPERLY MAINTAINED BOOKS OF ACCOUNT. 2 2. NOTWITHSTANDING THE ABOVE SAID GROUNDS OF APPEAL, T HE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.3,49,038/- A S PER PARA 6 OF HIS ORDER BY APPLYING GROSS PROFIT RATE @ 18% AGAINST ADDITION OF RS.8,13,725/- MADE BY THE ASSESSING OFFICER BY APPL YING GROSS PROFIT RATE @ RS.22%. 3. THAT THE LEARNED CIT(A) HAS ALSO ERRED IN CON FIRMING ADDITION OF RS.3,36,634/- AS PER PARA 7 OF HIS ORDER BY APPLYIN G GROSS PROFIT RATE OF 18% ON UNACCOUNTED SALE OF RS.18,70,1917- AGAINST ADDITION OF RS.4,11,442/- MADE BY THE ASSESSING OFFICER. 4. THAT THE LEARNED CIT(A) HAS ALSO ERRED IN CONF IRMING ADDITION OF RS.86,000/- AS PER PARA 10 OF HIS ORDER U/S 36(1)(I II) BY NOT CONSIDERING THAT ADVANCE IN QUESTION WAS RIGHTLY MADE FOR BUSIN ESS PURPOSES. 5. THAT THE ADDITIONS IN AFORESAID PARAGRAPHS HAVE BEE N CONFIRMED AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISS ION MADE BY US HAS NOT BEEN CONSIDERED PROPERLY. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. THE GROUND NOS.1(A) TO 1(C) ARE AGAINST REJECTIO N OF BOOKS OF ACCOUNT AND VIDE GROUND NO.2, THE ASSESSEE IS AGGRI EVED BY APPLICATION OF GROSS PROFIT RATE OF 18% BY THE CIT (APPEALS) RE SULTING IN ADDITION OF RS.3,49,038/- AS AGAINST 22% APPLIED BY THE ASSESSI NG OFFICER TO DETERMINE THE INCOME OF THE ASSESSEE FOR THE YEAR U NDER CONSIDERATION. VIDE GROUND NO.3 THE ASSESSEE IS FURTHER AGGRIEVED BY APPLICATION OF GROSS PROFIT RATE OF 18% ON UNACCOUNTED SALES OF RS .18,70,191/- BY THE CIT (APPEALS) RESULTING IN ADDITION OF RS.3,36,634/ -. 4. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITTE D THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND EVEN IF THE SAME ARE ACCEPTED, THE GROSS PROFIT RATE APPLIE D BY THE AUTHORITIES BELOW WAS ON THE HIGHER SIDE. 5. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE BUSINESS A S WELL AS RESIDENTIAL PREMISES 3 OF THE ASSESSEE WERE COVERED UNDER SEARCH OPERATION UNDER SECTION 132 OF THE ACT ON 24.2.2009. THE ASSESSEE FURNISHED RETURN OF INCOME IN RESPONSE TO THE NOTICE UNDER SECTION 153A OF THE ACT AT RS.41,25,65 0/-. DURING THE COURSE OF SEARCH, THE ASSESSEE WAS FOUND NOT TO BE MAINTAININ G ANY STOCK REGISTER/QUANTITATIVE RECORDS OF CONSUMPTION OF RAW MATERIAL AND FINISHED PRODUCTS. THE PLEA OF THE ASSESSEE BEFORE THE ASSE SSING OFFICER WAS THAT IT WAS SMALL SCALE ENTERPRISE AND WAS NOT POSSIBLE TO MAINTAIN SUCH RECORDS. THE ASSESSEE HAD DECLARED GROSS PROFIT RATE OF 15%. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT ON THE PREMISE THAT T HE ASSESSEE WAS NOT MAINTAINING QUANTITATIVE RECORDS OF INPUTS/OUTPUTS AND APPLIED GROSS PROFIT RATE @ 22% AS SIMILAR PROFIT RATE WAS DECLARED BY A NOTHER CONCERN IN LUDHIANA. THE ASSESSING OFFICER THUS MADE AN ADDIT ION OF RS.8,13,725/-. FURTHER THE ASSESSING OFFICER ALSO APPLIED SAME GRO SS PROFIT RATE OF 22% TO THE NEGATIVE STOCK FOUND DURING THE COURSE OF SEARC H OPERATION, DEEMING THE SAME TO BE THE SALES OUTSIDE THE BOOKS OF ACCOUNT. 7. BEFORE THE CIT (APPEALS) THE ASSESSEE EXPLAINED THE REASONS FOR FALL IN GP RATE THAT THE SALES HAD DECLINED BECAUSE OF SOME RIVALRY BETWEEN THE ASSESSEE AND HIS RELATIVES ON ACCOUNT OF WHICH COMP LAINTS WERE FILED AGAINST THE ASSESSEE AND ACTIONS WERE TAKEN BY THE EXCISE & TAXATION DEPARTMENT AND THE SALES TAX DEPARTMENT, WHICH HAD DISTURBED THE S TATE OF MIND OF THE ASSESSEE AND GOODWILL HAD GONE DOWN AND GOODS WERE SOLD AT LESSER RATES. FURTHER THE LEARNED A.R. FOR THE ASSESSEE FILED ON RECORD THE RESULTS DECLARED BY VARIOUS CONCERNS IN SIMILAR LINE OF BUSINESS AND IT WAS POINTED OUT THAT EXCEPT FOR THE CONCERN RELIED UPON BY THE ASSESSING OFFICER, ALL THE OTHER CONCERNS WERE DECLARING GROSS PROFIT RATE OF ABOUT 15%. THE CIT (APPEALS) APPLIED GP RATE OF 18% I.E. THE AVERAGE GP RATE OF ASSESSEE FOR THE LAST FOUR YEARS TO COMPUTE THE INCOME FROM BUSINESS IN THE HA NDS OF THE ASSESSEE RESULTING IN ADDITION OF RS.3,49,038/-. SIMILAR G P RATE WAS APPLIED ON UNACCOUNTED SALES AND ADDITION OF RS.3,36,634/- WAS PARTLY UPHELD ON THIS ACCOUNT BY THE CIT (APPEALS). THE ASSESSEE IS IN A PPEAL AGAINST BOTH THE ADDITIONS. 4 8. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WHERE THE ASSESSEE HAD DECLARED LOWER GP RATE DURING THE YEAR UNDER CONSID ERATION AS COMPARED TO THE EARLIER YEARS AND IN THE ABSENCE OF HAVING MAIN TAINED COMPLETE RECORDS IN RESPECT OF ITS STOCK AND FINISHED PRODUCTS, WE UPHO LD THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE INCOME IN THE HANDS OF THE ASSESSEE. HOWEVER, IN THE INTE REST OF JUSTICE, WE DIRECT THE ASSESSING OFFICER TO ADOPT GP RATE OF 17% TO CO MPUTE THE INCOME IN THE HANDS OF THE ASSESSEE FROM ITS BUSINESS. SIMILAR G P RATE OF 17% IS DIRECTED TO BE APPLIED TO THE UNDERSTATED SALES AND THE SAID AD DITION BE REWORKED IN THE HANDS OF THE ASSESSEE. THE GROUND NOS.2 AND 3 RAIS ED BY THE ASSESSEE ARE PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/ SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5