PRAVEEN JAIN, Jaipur V. ITO, Jaipur

ITA 444/JPR/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3008 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANITA RI TESH
• Assessee Lawyers: RAJIV SOGANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC, JAIPUR (BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER) ITA NO. 444/JP/2013 ASSESSMENT YEAR 2008-09 PAN NO. ACSPJ9371P PRAVEEN JAIN, VS. THE INCOME TAX OFFICE R PROP. M/S. SAMYAK CORPORATION, WARD 6(1), JAIPUR. 4/45, MALVIYA NAGAR, JAIPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI RAJIV SOGANI RESPONDENT BY : SMT. ANITA RITESH DATE OF HEARING: 27.06.2013 DATE OF PRONOUNCEMENT: 27.06.2013 O R D E R PER B.R. JAIN, AM:- THIS APPEAL BY ASSESSEE AGAINST ORDER DATED 15/2/2 013 OF LD. CIT(APPEALS)-II, JAIPUR, RAISES THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN REJ ECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISION O F SECTION 145(3) AND THEREAFTER APPLYING A G.P. RATE OF 13% AGAINST THE DECLARED G.P. RATE OF 11.79%, WHICH RESULTED INTO CONFIRMING THE TRADING ADDITION OF RS. 1,18,408/- MADE BY THE LD. AO. THE ACTION OF THE LD . CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE REJECTION OF BOOKS AND DELE TING THE TRADING ADDITION OF RS. 1,18,408/-. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 8,611/- MAD E BY THE LD. AO ALTHOUGH ALLOWED TELESCOPING. THE ACTION OF THE LD. CIT(A) O F CONFIRMING THE ADDITION IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGA INST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE CONFIR MATION OF ADDITION OF RS. 8,611/-. 3. THE ASSESSEE CRAVES HIS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2 2. IN GROUND NO.1 IN APPEAL, BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS A MANUFACTURER AND TRADER OF WATER PUMP, HDPE PIPES, ACCESSORIES, FITTINGS, GI SUBMERSIBLE HOSE SPRINKLER, NOZZLE AND SPARES ETC. AND MAINTAINED BOOKS OF ACCO UNT. IT HAS DECLARED INCOME OF RS. 2,61,690/-. THE ASSESSING OFFICER FOUND THAT NO STO CK REGISTER HAS BEEN MAINTAINED. HE, IN ABSENCE OF PROPER QUANTITATIVE DETAILS, WAS SATISFI ED THAT THE TRUE AND CORRECT PROFITS OF THE ASSESSEE COULD NOT BE DETERMINED FROM THE BOOKS OF ACCOUNT MAINTAINED BY HIM. HE, THEREFORE, REJECTED THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE I.T. ACT AND PROCEEDED TO ASSESS THE INCOME BY APPLICATI ON OF GROSS PROFIT RATE OF 13% ON THE SALES OF RS. 97,85,120/-. THIS RESULTED INTO AN ADD ITION OF RS. 1,18,408/-. 3. THE LD. CIT(A), UPHOLDING THE REJECTION OF ACCOU NTS ALSO UPHELD THE TRADING ADDITION BY APPLICATION OF GROSS PROFIT RATE OF 13% . 4. THE LD. COUNSEL FOR THE ASSESSEE SHRI RAJEEV SOG ANI ASSAILING THE IMPUGNED ORDER, ADMITS THAT THE ASSESSEE DID NOT MAINTAIN THE STOCK REGISTER AND DEFECTS AS POINTED OUT BY THE ASSESSING OFFICER DID SUBSIST IN THE BOOKS OF ACCOU NT MAINTAINED BY HIM. HE, THEREFORE, DOES NOT PRESS REJECTION OF ACCOUNT BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. HE, HOWEVER, FURTHER CONTENDS THAT THERE IS N O JUSTIFICATION IN APPLICATION OF GROSS PROFIT RATE OF 13% AS AGAINST THE DECLARED GROSS PR OFIT OF 11.79% ON THE TOTAL TURNOVER OF RS. 97,85,120/- AS AGAINST THE GROSS PROFIT RATE OF 13. 23% ON SALES OF RS. 54,42,787/- IN THE PRECEDING YEAR AND 10.85% ON THE SALES OF RS. 77,05 ,201/- IN THE YEAR PRIOR TO THAT. THE REFERENCE WAS ALSO MADE TO THE COMPARATIVE TRADING AND MANUFACTURING ACCOUNT PLACED AT ASSESSEES PAPER BOOK PAGE-2. THE APPELLANT HAS BEE N DOING BOTH MANUFACTURING AS WELL AS TRADING. A SEPARATE TRADING AND MANUFACTURING ACCOU NT FOR BOTH THE ACTIVITIES AT ASSESSEES PAPER BOOK PAGE-2 REVEALS THAT TRADING TURNOVER DUR ING THE YEAR UNDER CONSIDERATION HAS 3 INCREASED TO RS. 78,02,692/- AS AGAINST TURNOVER OF RS. 37,52,209/-. GROSS PROFIT ON TRADING ACTIVITY DURING THE YEAR UNDER CONSIDERATION IS 10. 16% AS AGAINST THE GROSS PROFIT OF 10.63% IN THE IMMEDIATELY PRECEDING YEAR. WHEREAS THE GROS S PROFIT ON MANUFACTURING ACTIVITIES DURING THE YEAR UNDER CONSIDERATION IS 18.21% AS AG AINST 19% IN THE IMMEDIATELY PRECEDING YEAR. DUE TO HIGHER TRADING TURNOVER DURING THE YEA R UNDER CONSIDERATION, OVER ALL GROSS PROFIT RATE DURING THE YEAR UNDER CONSIDERATION HAS COME DOWN TO 11.79% AS AGAINST THE CONSOLIDATED GROSS PROFIT RATE OF 13.23% IN THE IMM EDIATELY PRECEDING YEAR. THERE IS, HOWEVER, ONLY MARGINAL DECREASE BY .50% ONLY IN EAC H OF SUCH ACTIVITIES WHEN VIEWED INDIVIDUALLY IN RESPECT OF TURNOVER OF MANUFACTURIN G AND TRADING ACTIVITIES SEPARATELY. THE AUTHORITIES BELOW HAVE NOT APPRECIATED THESE FACTS IN THE RIGHT PERSPECTIVE. THE SAID DECLINE WAS ALSO EXPLAINED AND WAS ATTRIBUTABLE TO THE INCR EASE IN TURNOVER IN TRADING ACTIVITY BY THE ASSESSEE. IT, THEREFORE, HAS BEEN CONTENDED THAT TH E UNJUSTIFIED ADDITION SO MADE REQUIRES TO BE DELETED. 5. ON THE OTHER HAND, THE LD. D.R. PLACED RELIANCE ON THE FACTS AND CONCLUSIONS REACHED BY THE AUTHORITIES BELOW AS THE ASSESSING O FFICER ADOPTED A REASONABLE RATE OF GROSS PROFIT KEEPING IN VIEW THE GROSS PROFIT RATE OF 13.23% DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR. 6. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. ADMITTEDLY, THE TRADING TURNOVER HAS RESULTED INTO THE DECLINE IN CONSOLIDATED GROSS PROFIT RATE IN THE YEAR UNDER CONSIDERATION WHEN IT IS COMPARED WITH THE GROSS PROFIT RATE OF T HE IMMEDIATELY PRECEDING YEAR. THE WHOLE DECLINE, HOWEVER, IS NOT ATTRIBUTABLE TO THE INCREASE IN TURNOVER OF TRADING OF GOODS ALONE. THERE IS A DEFINITE DECLINE OF GROSS PROFIT RATE BY 0.50% DURING THE YEAR UNDER CONSIDERATION WHEN IT IS COMPARED WITH THE ASSESSEE S OWN HISTORY OF THE EARLIER YEARS. THE ASSESSEE HAS NOT PRODUCED ANY RELIABLE MATERIAL TO SUBSTANTIATE AS TO WHETHER ALL THE 4 PURCHASES AND SALES AND THE QUANTITIES HANDLED ARE DULY ACCOUNTED FOR IN DEDUCING THE PROFITS OF THE YEAR UNDER CONSIDERATION. AFTER THE REJECTION OF ACCOUNTS, WHICH SUFFERED FROM GLARING DEFECTS, ESSENTIALLY THE INCOME WAS TO BE R EASONABLY ESTIMATED ON THE BASIS OF MATERIAL ON RECORD. THE ASSESSING OFFICER, HOWEVER, DID NOT RESORT TO REASONABLE ESTIMATE ON THE PECULIAR FACTS OF THE CASE UNDER CONSIDERATI ON. I, THEREFORE, FIND IT REASONABLE TO APPLY THE GROSS PROFIT RATE OF 12.25% ON THE TOTAL TURNOV ER OF RS. 97,85,120/- AND DIRECT THE ASSESSING OFFICER TO DETERMINE THE INCOME ACCORDING LY. GROUND NO. 1 IN APPEAL STANDS PARTLY ALLOWED. 7. IN SO FAR AS GROUND NO. 2 IN APPEAL IS CONCERNED , THE SAME RELATES TO PERSONAL USER OF SALES PROMOTION AND TELEPHONE EXPENSES THAT STOO D DISALLOWED BY RS. 8,611/-. THE MAKING OF REASONABLE ESTIMATE IS PERMISSIBLE IN COM PUTING ASSESSABLE INCOME OF THE ASSESSEE. THIS POSITION HAS ALSO BEEN APPROVED BY T HE JURISDICTIONAL HIGH COURT IN THE CASE OF KANHAIYA LAL JANGID VRS. ACIT, 2008, 217 CTR (RA J). 354. THE DISALLOWANCE SO MADE, THEREFORE, DOES NOT CALL FOR ANY INTERFERENCE. THE LD. CIT(A) IN THIS CASE, HAS ALLOWED THE TELESCOPING OF THE SAID DISALLOWANCE INTO TRADING A DDITION. THE REVENUE IS NEITHER IN APPEAL NOR HAS ASSAILED THE CORRECTNESS OF SUCH DECISION T AKEN BY THE LD. CIT(A). I, THEREFORE, WITHOUT MAKING ANY COMMENTS THEREON, REJECT THE GRO UND IN APPEAL RAISED BY THE ASSESSEE. ACCORDINGLY, GROUND NO. 2 IN APPEAL STANDS REJECTED . 8. IN THE RESULT, THE APPEAL STANDS PARTLY ALLOWED AS ANNOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2013. SD/- (B.R. JAIN) ACCOUNTANT MEMBER JAIPUR, DATED 27/06/2013 *RANJAN 5 COPY FORWARDED TO:- 1. PRAVEEN JAIN, JAIPUR. 2. THE INCOME TAX OFFICER, WARD 6(1), JAIPUR. 3. THE CIT(A) 4. THE CIT 5. THE D.R. GUARD FILE (ITA NO. 444/JP/2013. BY ORDER, AR, ITAT JAIPUR.