ITO, Gurgaon V. Sh. Rajesh Kumar Mangla, Gurgaon

ITA 4503/DEL/2013

• Counselvise Citation: 450320114 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: VINOD ARORA
• Keywords: Additional evidence
• Section: 142(1)

Judgement Text

ITA NO. 4503/ DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. N O. 4 503 /DEL/20 13 A.Y. : 200 8 - 0 9 INCOME TAX OFFICER, WARD 2(1), GURGAON VS. SH. RAJESH KUMAR MANGLA, 13 - A, MIANWALI COLONY, GURGAON (PAN: AHCPM1045P) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. VIKRAM SAHAY, SR. D.R. ASSESSEE BY : SH. VINOD ARORA, CA DATE OF HEARING : 06 - 0 1 - 201 5 DATE OF ORDER : 0 9 - 01 - 201 5 ORDER PER H.S. SIDHU : J M TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) - 2 , FARIDABAD DATED 20.5.2013 P ERTAINING TO ASSESSMENT YEAR 200 8 - 0 9 . 2. THE GROUNDS OF APPEAL READ AS UNDER: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 22,85,157/ - MADE BY THE ASSESSING OFFICER BY REJECTING BOOKS OF ACCOUNTS AND APPLYING A HIGHER GP THAN SHOWN BY ASS ESSEE DESPITE THE FACT THAT AO REJECTED BOOKS AFTER ASCERTAINING THAT THE ASSESSEE S BALANCE SHEET SHOWED TRANSACTIONS WITH FIVE PARTIES WHO HAD DENIED BUSINESS TRANSACTIONS WITH THE ASSESSEE. ITA NO. 4503/ DEL/ 2013 2 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C IT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 22,85,157/ - MADE BY THE ASSESSING OFFICER BY ACCEPTING THE DEBTORS AS GENUINE WHEREAS DURING THE ASSESSMENT PROCEEDINGS ALL THE DEBTORS WERE PROVED TO BE NON GENUINE HAVING NO BUSINESS WITH THE ASSESSEE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN ACCEPTING THE ASSESSEE STAND REGARDING GENUINENESS OF TRANSACTIONS WHEN THE PARTY COULD NOT BE LOCATED AT THE GIVEN ADDRESS. 4. THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CASE RETURN DECLARING INCOME OF RS. 12,81,970/ - , WAS FILED ON 29.9.2008 WHICH WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961 ON 17.3.2010 AT THE RETURNED INCOME. THE CASE WAS SELECTED UNDER COMPULSORY SCRUTINY THROUGH CASS. STATUTORY NOTICE U/ S. 143(2) OF THE I.T. ACT, 1961 WAS ISSUED ON 12.8.2009, WHICH WAS DULY SERVED UPON THE ASSESSEE. NOTICE U/S. 142(1) ALONGWITH DETAILED QUESTIONNAIRE WAS ISSUED ON 17.8.2010, WHICH WAS DULY SERVED UPON THE ASSESSEE. THE JURISDICTION OVER THE CASE WAS AS SIGNED TO THE OFFICE OF THE ADDL. CIT, GURGAON RANGE - II, GURGAON. REQUISITE INFORMATION CALLED FOR HAVE BEEN FURNISHED, EXAMINED AND VERIFIED AND PLACED ON RECORDS. ON GOING THROUGH THE RECORDS, LD. AO OBSERVED THAT DEBTORS SHOWN BY THE ASSESSEE ARE BOGUS AND FICTITIOUS. HENCE, THE BOOKS OF ACCOUNTS OF THE ASSESEE ARE NOT RELIABLE AND THE SAME ARE DEFECTIVE. THEREFORE, THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED U/S. ITA NO. 4503/ DEL/ 2013 3 145 OF THE ACT AND ACCORDINGLY, MADE THE ADDITION OF RS. 22,85,117/ - IN THE HANDS O F THE ASSESSEE VIDE ORDER DATED 31.12.2010. 4. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). LD. CIT(A) ELABORATELY DISCUSSED THE ISSUES IN HIS ORDER AND ACCORDINGLY, DELETED THE ADDITION MADE BY THE AO BY ALLOWING THE ASSESSE E S APPEAL VIDE ORDER DATED 1 0 . 1 .20 11 . 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RELEVANT RECORDS , ORDERS OF THE REVENUE AUTHORITIES AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE TH ROUGH PAPER BOOK WHEREIN HE HAS STATED THAT LD. CIT(A) VIDE PARA 3.7 CLARIFIES THAT IN THIS REMAND REPORT THE LD. AO HAS ACCEPTED THAT ACCOUNT WAS CONFIRMED BY FOUR PARTIES AND TRANSACTION WITH ALL THE FIVE PARTIES STATED IN ASSESSMENT ORDER WERE DULY REF LECTED IN BANK ACCOUNT OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THOSE PARTIES WERE CUSTOMER OF THE ASSESSEE, THERE WAS NO OUTSTANDING BALANCE RECEIVABLE FROM THEM AT THE CLOSE OF THE YEAR. TRANSACTION WITH THEM WAS ONLY TO TUNE OF RS. 4,03,319/ - AS A GAINST TOTAL TURNOVER FOR THE YEAR BEING RS. 22,34,09,540/ - . REJECTION OF BOOKS OF ACCOUNT ON THIS GROUND IS TOTALLY UNLAWFUL AND INCORRECT. 6.1 WE FIND THAT AO, ON A PERUSAL OF TRADING AND PROFIT AND LOSS ACCOUNT OBSERVED THAT THE ASSESSEE HAD CREDIT ED COMMISSION ITA NO. 4503/ DEL/ 2013 4 INCOME AT RS. 21,39,686/ - AND GP HAD BEEN SHOWN AT RS. 20,88,624/ - WHEREAS IN THE PRECEDING ASSESSMENT YEAR THE COMMISSION INCOME HAD NOT BEEN CREDITED IN THE TRADING ACCOUNT AND WAS SHOWN SEPARATELY IN THE PROFIT AND LOSS ACCOUNT. THE AO, THEREFORE, REDUCED COMMISSION INCOME IN THE CURRENT YEAR, WHICH RESULTED IN GP GOING DOWN TO ( - ) 0.02%. ON THE BASIS OF THESE CALCULATIONS, THE AO CONCLUDED THAT THERE WAS A FALL IN GP RATE BY 0.62% DURING THE YEAR AS COMPARED TO THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR. SINCE THE ASSESSEE WAS NOT ABLE TO PRODUCE CONFIRMATIONS, THE AO REJECTED THE BOOKS U/S. 145 OF THE INCOME TAX ACT AND ESTIMATED THE GP RATE @1% RESULTING IN AN ADDITION OF RS. 22,85,157/ - . WE ALSO FIND THAT LD. CIT(A) SENT THE ADDITION AL EVIDENCE SUBMITTED BY THE ASSESSEE TO THE AO FOR HIS REMAND REPORT AND AO HAS SUBMITTED HIS REPORT ON 19.2.2013 WHICH IS REPRODUCED HEREUNDER: - FROM THE ABOVE FACTS, IT IS CLEAR THAT ONLY ONE DEBTOR, M/S SPICE COMMUNICATION HAS FURNISHED CONFIRMATION ALONGWITH COPY OF ACCOUNT. CONFIRMATION IN R/O M/S SONI CELLPHONE, M/S PRIYANKA COMMUNICATIONS, M/S JAIN COMMUNICATIONS HAS BEEN FURNISHED BY THE COUNSEL OF THE ASSESSEE. IN THE CASE OF M/S JMD COMMUNICATION, THE COUNSEL OF THE A SSESSEE WAS ALSO NOT ABLE TO FURNISH CONFIRMATION. HOWEVER, THE TRANSACTIONS OF ALL THE DEBTORS ARE DULY REFLECTED IN THE BANK ITA NO. 4503/ DEL/ 2013 5 ACCOUNT OF THE ASSESSEE. KEEPING IN VIEW THE ABOVE FACTS, ADMISSION OF ADDITIONAL EVIDENCE MAY KINDLY BE DECIDED ON MERITS. FROM THE ABOVE, WE FIND THAT LD. CIT(A) CLARIFIED THAT THE AO IN HIS REMAND REPORT HAS ACCEPTED THAT ACCOUNT WAS CONFIRMED BY FOUR PARTIES AND TRANSACTION WITH ALL THE FIVE PARTIES STATED IN ASSESSMENT ORDER WERE DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE. 6.2 WE ALSO FIND THAT LD. CIT(A) HAS OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION AND THE IMMEDIATELY PRECEDING YEAR THE ASSESSEE WAS A DISTRIBUTOR OF IDEA RECHARGEABLES AND HANDSETS. DURING THE YEAR UNDER CONSIDERATION, THERE WAS A CHA NGE IN THE WAY THE ACCOUNTS WERE PRESENTED BY THE ASSESSEE. WE FIND LD. CIT(A) IN THE IMMEDIATELY PRECEDING YEAR SALES / PURCHASES OF RECHARGEABLES BEING TAX FREE WERE SHOWN SEPARATELY BY NETTING OFF THEIR SALE AND PURCHASES AND SHOWING ONLY THE NE T INCOME ARISING ON ACCOUNT OF PURCHASE AND SALE OF RECHARGEABLES. WE FIND THAT LD. CIT(A) HAS OBSERVED THAT THE GP RATE IN CASE OF PURCHASE /SALE OF HANDSETS AND THAT IN ANY PURCHASE /SALE OF RECHARGEABLES FOR THE PERIOD RELEVANT TO THE ASSESSMENT YE AR 2007 - 08 AND ASSTT. YEAR 2008 - 09 IS AS UNDER: - ITA NO. 4503/ DEL/ 2013 6 GP RATE 2008 - 09 2007 - 08 HANDSETS .62% .62% RECHARGEABLES .94% .84% THUS, IF THE SAME ACCOUNTING TREATMENT IS GIVEN TO THE BUSINESS OF PURCHASE / SALE OF RECHARGEABLE IN BOTH THE YEA RS, THE GP RATE DURING THE YEAR UNDER CONSIDERATION TURNS OUT TO BE HIGHER THAN IN THE IMMEDIATELY PRECEDING YEAR. LD. CIT(A) OBSERVED THAT THE ARGUMENT OF THE AO THAT THE GP RATE HAS FALLEN IN THE YEAR UNDER CONSIDERATION COMPARED TO THE IMMEDIATELY P RECEDING YEAR IS BEREFT OF ANY FORCE AND LOGIC. WE FIND THAT LD. CIT(A) HAS BEEN ABLE TO UNDERSTAND THE EXPLANATION GIVEN BY THE ASSESSEE WITH FACTS AND FIGURES THAT THE GP RATE IS HIGHER DURING THE CURRENT YEAR IN THE BUSINESS OF TRADING IN RECHARGEABLE S AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR WHEREAS IN THE BUSINESS OF TRADING IN HANDSETS, CONSTITUTING A VERY SMALL PART OF THE TOTAL BUSINESS OF THE ASSESSEE, THE GP RATE IS THE SAME FOR THE TWO YEARS. THUS, ON A CONSOLIDATED BASIS THE GP RATE OF T HE ENTIRE BUSINESS OF THE ASSESSEE IS HIGHER DURING THE CURRENT YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. WE FIND LD. CIT(A) HAS CONCLUDED THAT AO WAS NOT JUSTIFIED TO REJECT THE BOOKS OF ACCOUNTS TO ESTIMATE THE PROFITS OF THE ASSESSEE AT THE RA TE HIGHER THAN THAT GIVEN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE GP RATE AS EXPLAINED BY THE ASSESSEE WAS HIGHER IN THE YEAR UNDER CONSIDERATION COMPARED TO THE IMMEDIATELY PRECEDING YEAR AND HENCE ANY ADDITION ON THIS BASIS WAS UNCALLED FOR. AS REG ARDS CONFIRMATIONS, THE ASSESSEE WAS GIVEN INADEQUATE TIME TO FILE THESE. IF THE AO WANTED TO GET THE ACCOUNTS OF SOME OF THE PARTIES CONFIRMED, HE COULD HAVE GIVEN SOME MORE TIME TO THE ASSESSEE TO FILE CONFIRMED COPIES OF ACCOUNTS WHICH COULD HAVE CH ANGED HIS MIND REGARDING HIS ACTION TO REJECT THE BOOKS OF ITA NO. 4503/ DEL/ 2013 7 ACCOUNT. THEREFORE, LD. CIT(A) HELD THAT AO WAS ERRED IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATING PROFITS OF THE ASSESSEE. HENCE, HE DELETED THE ADDITION MADE BY THE AO. I N VIEW OF THE ABOVE, WE FIND THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION RS. 22,85,157/ - WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, THE SAME IS UPHELD. 7 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE O PEN C OURT ON 0 9 / 0 1 /20 1 5 . SD / - S D / - [ S.V. MEHROTRA ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 0 9 / 0 1 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 4503/ DEL/ 2013 8