The ACIT, Circle-2, RAJKOT-GUJARAT V. Shri Prakash J. Bagdai, RAJKOT-GUJARAT

ITA 439/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0170 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 23-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVINASH KUMAR
• Assessee Lawyers: M N MANYAK
• Keywords: Depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO.439/RJT/2012. / ASSESSMENT YEAR 2008-09 ASSTT.COMMISSIONER OF INCOME -TAX, CIRCLE-2, AAYAKAR BHAVAN, 3 RD FLOOR, RACE COURSE, RING ROAD, RAJKOT-360001 ( * / APPELLANT) VS. SHRI PRAKASH J BAGDAI, PRABHAT VILLA, NR.CHAUDHARY SCHOOL, RAJKOT-360001. PAN: AAGPB5275J +,* / RESPONDENT - / REVENUE BY SHRI. ARVINASH KUMAR /- / ASSESSEE BY SHRI M.N.MANYAK - / DATE OF HEARING 14.9.2012 - / DATE OF PRONOUNCEMENT 21.09.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 11.5.2012 OF CIT (A) FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEF FACTS RELATING TO THE CONTROVERSY IN THIS AP PEAL ARE THAT THE ASSESSEE IS AN AUTHORIZED DEALER FOR SAURASHTERA KUTCH R EGION OF MITSUBHI-LANCER CAR MANUFACTURED BY HINDUSTAN MOTORS LT D.. IT FILED THE RETURN ON 30.9.2008 DECLARING LOSS OF RS.30,51,609/-. T HE AO SELECTED THIS ITA NO.439/RJT/2012. 2 FOR SCRUTINY BY ISSUING THE NOTICE U/S 143(2) ALONG WITH QUESTIONER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN GP AT 2.89% FOR THE YEAR UNDER APPE AL AS AGAINST THE GP AT 16.92% IN THE IMMEDIATELY PRECEDING ASSE SSMENT YEAR THOUGH OVERALL TURNOVER OF THE ASSESSEE WAS INCREASED. THE AO CALLED AN EXPLANATION FROM THE ASSESSEE TO SHOW REASONS FOR SUCH DRAST IC FALL IN GP. THE ASSESSEE SUBMITTED THAT THERE WAS INCREASE IN AVERAGE COST OF PURCHASE TO THE TUNE OF RS.1,54,291/- AS COMPARED TO FY 2006-07, AS AGAINST AVERAGE SALES REALIZATION INCREASED BY RS.96,507/ -. THE ASSESSEE CLOSED DOWN THE BUSINESS IN FY 2008-09 AS THE BUSINESS WAS NOT LUCRATIVE AND THEREFORE DISPOSED OF ALL THE CARS AT THE REDUCED SELLING RATE. THE AO FURTHER APPLIED GP OF 10% AFTER DEDUCTING E XPENSES AND DEPRECIATION. 3. ON APPEAL, IN THE IMPUGNED ORDER , THE LD.CIT(A ) REDUCED THE CLAIM OF BUSINESS LOSS TO RS.1,57,055/- AND HELD THAT TH E REJECTION OF ENTIRE BOOKS OF ACCOUNT CANNOT BE SUSTAINED FOR SOME DEFE CTS IN THE COUNTER ACCOUNT WITH THE CUSTOMERS WHEN THERE IS NO D EFECTS IN THE BOOKS OF ACCOUNT AND VOUCHERS AND BILLS AND HENCE THE QUESTION OF ESTIMATION OF INCOME DOES NOT ARISE. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOL LOWING GROUNDS : 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACT S IN HOLDING THAT AOS ACTION OF REJECTING BOOKS OF ACCOUNT U/S 145(3) OF THE IT ACT IS NOT APPROPRIATE. 2. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS IN FACT S IN RESTRICTING THE ADDITION TO THE EXTENT OF RS.1,57,05 5/- INSTEAD OF RS.32,20,348/- MADE BY THE AO ON ACCOUNT OF ESTIMATE O F PROFIT. ITA NO.439/RJT/2012. 3 3. ON FACTS OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY KINDLY BE SET ASIDE AND THAT OF THE AO MAY KINDLY BE RESTORED BACK TO THE EXTENT. 4. AT THE TIME OF HEARING, BEFORE US, SHRI AVINASHKUM AR, THE LD. DR APPEARED AND POINTED OUT THAT THE DECISION OF THE LD. CIT(A) IS NOT ACCEPTED BECAUSE DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO CALLED THE DETAILS IN RESPECT OF TRADING ACCOUNT ETC AN D NOTICED THAT THERE WAS GROSS LOSS ON ACCOUNT OF LOWER REALIZATION OF CARS A ND AVERAGE PURCHASE OF COST OF CAR. HE FURTHER POINTED OUT THA T DURING THE COURSE OF REMAND PROCEEDINGS THE AO TRIED TO VERIFY GENUINEN ESS OF BUYERS BUT OUT OF 9 LETTERS SENT, 6 LETTERS HAVE CAME BACK UNSERVED O R NO RESPONSE RECEIVED. APART FROM THIS, THE ASSESSEE HAS ALSO NOT PROD UCED CONTRA ACCOUNT AND DETAILS REGARDING GENUINENESS OF BUYERS. T HE LD. DR FURTHER POINTED OUT THAT NO PRUDENT BUSINESSMAN WILL SALE IT S COMMODITIES FOR LESS THAN ITS PURCHASE PRICE. IT IS UNBELIEVABLE THAT BUSI NESS OF CAR WAS NOT LUCRATIVE AND ASSESSEE WILL DISPOSE OF ALL THE CARS AT REDUCED SELLING RATE IS ALSO UNBELIEVABLE. THE LD DR ALSO DREW OUR A TTENTION TO THE DECISION IN THE CASE OF AJAY GOEL V/S ITO (2006) TTJ (JD ) RELIED BY THE AO IN THE ASSESSMENT ORDER AND CONTENDED THAT THE BEST G UIDE FOR ESTIMATION OF TRADING RESULT AFTER REJECTING THE BOO KS IS EITHER THE PAST HISTORY OF THE ASSESSEE OR ANY OTHER COMPARABLE CASE. H ENCE THE AO APPLIED THE PROVISIONS OF SECTION 145(3) OF THE ACT ; AND DETERMINED THE GP AT THE RATE OF 10% KEEPING IN VIEW THE GP DECLARE D BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR. ITA NO.439/RJT/2012. 4 5. AS AGAINST THIS, SHRI M.N.MANYAK, THE LD. COUNSEL AP PEARED ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDERS O F AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO PRUDENT BUSINESSMAN WILL CLOSE DOWN ITS LUCRATIVE BUSINESS. IT I S UNDISPUTED FACT THAT IN ORDER TO CLOSE ITS BUSINESS, THE ASSESSEE DISPOSED O F ALL THE CARS AT A BEST AVAILABLE PRICE AND IN THE PROCESS, IN THE ASSESSME NT YEAR UNDER APPEAL IT HAS INCURRED SOME LOSS. THE LD. CIT(A) AFTE R APPRECIATING THE FACTUAL POSITION IN WHICH THE ASSESSEE WAS PLACED AND ACCEP TED THE BOOK RESULT, THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS SOLD THE CARS AT DISCOUNTED RATE TO M/S ACME MOTORS P VT.LTD AS IT WAS CLOSING DOWN THE BUSINESS OF SALE OF CARS. FOR THIS PURP OSE IT APPEARS THAT THE ASSESSEE HAS ALLOWED SOME DISCOUNT. ONLY FOR THIS REASON, WE ARE ALSO OF THE VIEW THAT THE ENTIRE BOOKS OF ACCOUNT CANNOT BE REJECTED. BE THAT IT MAY, AFTER APPRECIATING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) REDUCED THE CLAIM OF BUSINESS L OSS AS RETURNED BY THE ASSESSEE BY RS.1,57,055/-. WE ARE, THEREFORE, INCLIN ED TO UPHELD THE ORDER OF THE LD. CIT(A). RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD SD ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 21-09-2012. /RAJKOT ITA NO.439/RJT/2012. 5 SRL - -- - +4 +4 +4 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-, 2. +,* / RESPONDENT- 3. : / CONCERNED CIT. 4. :- / CIT (A). 5. 4 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.