M/s Goyal Saree Palace Pvt. Ltd., Noida V. ACIT, Noida

ITA 4625/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5754 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 08-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: K P GARG

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : C NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.4625/DEL./2009 (ASSESSMENT YEAR : 2005-06) M/S GOYAL SAREE PALACE PVT. LTD., VS. ACIT, CIRCLE , V-52, MAIN MARKET, NOIDA. SECTOR 5, HAROLA, NOIDA (PAN/GIR NO.AACCG0124G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.P. GARG, ADV. REVENUE BY : SHRI MANISH GUPTA, SR.DR ORDER PER A.K. GARODIA, AM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF CIT(A), GHAZIABAD DATED 3.9.2009 FOR AY 2005-06. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE IMPUGNED ORDER OF THE LD.AO APPLYING PROVISO TO S.145 WHICH IS CONTRARY TO LAW, EQUITY AND JUSTICE AND FACTS AND MATERIAL ON RECORD , ARBITRARY, BASED ON CONJECTURES AND SURMISES, PASSED WITHOUT APPLICATIO N OF MIND, WITHOUT GRANTING PROPER OPPORTUNITY TO DEFEND. 2. THE APPELLANT DENIES HIS LIABILITY TO TAX AS UPH ELD BY THE LD.CIT(A) AND DETERMINED AND COMPUTED BY THE LD.AO AND THE MANNER IN WHICH IT HAS BEEN SO DETERMINED OR COMPUTED. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN S USTAINING THE IMPUGNED ADDITION @ 4% OF DECLARED TURNOVER AMOUNTING TO RS. 4,74,445/- AS AGAINST THE RETURNED INCOME OF RS.81,983/-. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S CARRYING ON RETAIL TRADE OF GARMENTS AND DURING THIS YEAR, THE ASSESSEE HAS DECLARED A T URNOVER OF RS.1,98,61,129. THE TURNOVER DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE AO. THE ASSESSEE HAD DECLARED A NET TAXABLE INCOME OF RS.89,983/- WHICH IS AROUND 0.69% OF THE TURNOVER. ITA NO.4625/DEL./2009 (AY : 2005-06) 2 DURING THE PRECEDING YEAR, THE TURNOVER OF THE ASSE SSEE WAS RS.105.31 LAKHS AND NET INCOME DECLARED BY THE ASSESSEE IN THE PRECEDING YE AR WAS RS.51,277/- WHICH COMES EQUAL TO 0.49% OF THE TURNOVER OF THE PRECEDING YEA R. THE AO HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND HAD ESTIMATED THE NET P ROFIT FOR THE PRESENT YEAR @ 5% OF THE TURNOVER DECLARED BY THE ASSESSEE OF RS.198.61 LAKH S. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND HE ESTIMATED THE INCOM E OF THE ASSESSEE AT 4% OF THE TURNOVER DECLARED BY THE ASSESSEE AND NOW THE ASSES SEE IS IN FURTHER APPEAL BEFORE US. 3. IT IS AGREED TO BY BY BOTH SIDES THAT REVENUE IS NOT INN APPEAL FOR THE RELIEF ALLOWED BY LD.CIT(A). IT IS SUBMITTED BY THE LD.AR OF THE ASSESSEE THAT AO HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE MAINLY FOR THE REA SON THAT THE ASSESSEE IS NOT MAINTAINING STOCK REGISTER. IT IS SUBMITTED THAT I N THE PRESENT CASE, THE ASSESSEE IS A RETAIL DEALER OF GARMENTS AND HENCE MAINTAINING OF DAY-TO- DAY AND ITEM-WISE STOCK REGISTER IS NOT PRACTICEABLE AND HENCE FOR THIS REASON, BOOKS O F THE ASSESSEE CANNOT BE REJECTED. IN SUPPORT OF THIS, RELIANCE WAS PLACED BY HIM ON THE TRIBUNAL DECISION, RENDERED IN THE CASE OF PRAKASH CHAND AS REPORTED IN 100 TTJ (JD.)639. RELIANCE WAS ALSO PLACED ON ANOTHER TRIBUNAL DECISION RENDERED IN THE CASE OF DCIT VS. GAJANAND TRADERS AS REPORTED IN 104 TTJ (BAN.) 1030. RELIANCE WAS ALSO PLACED ON SEVERA L OTHER DECISIONS IN SUPPORT OF THE SAME CONTENTION THAT MERELY FOR THE REASON THAT THE ASSESSEE IS NOT MAINTAINING DAY TO DAY STOCK REGISTER, BOOKS OF ACCOUNT CANNOT BE REJECTED . REGARDING THE OTHER OBJECTIONS OF THE AO, IT WAS SUBMITTED BY THE LD.AR OF THE ASSESSEE T HAT REGARDING NON-PRODUCTION OF SALARY AND WAGES REGISTER, IT WAS SUBMITTED BEFORE THE AO THAT SINCE THE SALARY IS PAID BY VOUCHERS, SALARY REGISTER WAS NOT MAINTAINED AND IT IS NOT NECESSARY. REGARDING NOT MENTIONING OF DETAILS IN THE PURCHASE BILLS, IT WAS SUBMITTED THAT DUE TO UNDERSTANDING OF THE ASSESSEE WITH THE SUPPLIERS, THE DESCRIPTION IS NOT MENTIONED IN THE BILLS AND FOR THIS NO ADVERSE INFERENCE CAN BE DRAWN. IT WAS HIS ALTE RNATIVE CONTENTION THAT EVEN IF THE INCOME OF THE ASSESSEE IS TO BE ESTIMATED AFTER REJ ECTING THE BOOKS OF ACCOUNT, ESTIMATION OF INCOME @ 4% OF THE TURNOVER IS HIGHLY EXCESSIVE AND THE SAME SHOULD BE REASONABLE. 4. AS AGAINST THIS, LD.DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. RELIANCE WAS PLACED BY HIM ON THE JUDGMENT OF THE HONBLE P&H HIGH COURT RENDERED IN THE CASE OF AXIA ENGINEERING WORKS VS. CIT REPORTED IN 292 ITR 577 IN ITA NO.4625/DEL./2009 (AY : 2005-06) 3 SUPPORT OF THIS CONTENTION THAT WHEN THE ASSESSEE H AS NOT MAINTAINED DAY-TO-DAY STOCK REGISTER, THE BOOKS OF ACCOUNT CAN BE REJECTED. RE LIANCE WAS ALSO PLACED ON THE JUDGMENT OF HONBLE PATNA HIGH COURT RENDERED IN THE CASE OF CIT VS, PARECK BROTHERS AS REPORTED IN 167 ITR 344 IN SUPPORT OF THE SAME CONTENTION. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN T HE CASE OF DHONDIRAM DULICHAND, AS REPORTED IN 81 ITR 609 AND THE JUDGMENT OF THE H ONBLE APEX COURT RENDERED IN THE CASE OF S.N. NAMASIVAYAM SETTIAR VS. CIT, AS REPORT ED IN 38 ITR 579. REGARDING THIS CONTENTION THAT G.P. AND N.P. IN THE PRESENT CASE A RE HIGHER THAN OF THE PRECEDING YEARS, IT WAS SUBMITTED THAT IN THE PRECEDING YEARS, THERE WA S NO SCRUTINY ASSESSMENT AND HENCE IT CANNOT BE COMPARED WITH THOSE YEARS. HE STRONGLY S UPPORTED THE ORDER OF THE CIT(A). 5. IN THE REJOINDER, IT WAS SUBMITTED BY LD.AR OF T HE ASSESSEE THAT SALARY VOUCHERS WHICH ARE COMMENTED UPON BY THE AO FOR THE MONTH OF APRIL, 2004 AND MARCH, 2005 ARE AVAILABLE ON PAGES 30-42 OF THE PAPER BOOK AND IN T HE SAME, IT CAN BE SEEN THAT COMPLETE ATTENDANCE DETAILS AND OTHER PARTICULARS OF SALARY PAYMENTS ALONG WITH SIGNATURE OF THE PAYEE ARE AVAILABLE. IT IS SUBMITTED THAT HENCE TH ERE IS NO DEFECT IN THE SALARY VOUCHERS. REGARDING OTHER VOUCHERS WHICH ARE COMMENTED UPON B Y THE AO, IT IS SUBMITTED THAT THESE VOUCHERS ARE AVAILABLE ON PAGES 43-54 OF THE PAPER BOOK AND SINCE THESE ARE ONLY FOR PAYMENT TO SUPPLIERS, NAME OF SUPPLIER IS MENTI ONED IN THE VOUCHERS ALONG WITH BILL NUMBER AND DATE ETC. WHERE PAYMENT IS MADE AS PER B ILL AND WHERE ONLY LUMP SUM ADVANCE BE MADE ONLY THE NAME OF THE SUPPLIER IS ME NTIONED TO WHOM THE PAYMENT WAS MADE AND NO ADVERSE INFERENCE CAN BE DRAWN FROM THE SE VOUCHERS ALSO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW. WE FIND THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE AO NOT ONLY FO R NON-MAINTENANCE OF DAY-TO-DAY STOCK REGISTER, BUT OTHER DEFECTS ARE ALSO POINTED OUT BY THE AO IN THE BOOKS OF THE ASSESSEE. THE AO HAS DOUBTED THE CORRECTNESS OF TH E PURCHASE BILLS BECAUSE IT IS NOTED BY THE AO THAT THE DESCRIPTION OF THE GOODS IS NOT MEN TIONED IN THE BILLS. WE ALSO FIND THAT SOME SAMPLE PURCHASE BILLS ARE AVAILABLE IN THE PAP ER BOOK AND IN SOME OF THE BILLS AVAILABLE IN THE PAPER BOOK, PROPER DETAIL OF THE I TEM SUPPLIED BY THE SUPPLIER IS NOT AVAILABLE. THE OTHER OBJECTION OF THE AO IS THAT T HE ASSESSEE COULD NOT BE ABLE TO LINK THE ITA NO.4625/DEL./2009 (AY : 2005-06) 4 PURCHASES WITH SALES. WE FEEL THAT EVEN IN CASE OF RETAIL TRADE, IT MAY BE THAT ENTIRE SALE BILL COULD NOT BE CORRELATED WITH THE EXACT PURCHAS E BILL, BUT IT IS STILL UNACCEPTABLE THAT NO SALE COULD BE CORRELATED WITH THE PURCHASE BILL. R EGARDING NON-MAINTENANCE OF STOCK REGISTER ALSO, IT IS A SUBMISSION OF THE ASSESSEE T HAT SINCE THE ASSESSEE IS DEALING IN VARIOUS ITEMS, ITEM-WISE STOCK REGISTER CANNOT BE MAINTAINE D. THE QUANTITY SUMMARY PREPARED BY THE ASSESSEE IS AVAILABLE ON PAGE19 OF THE PAPER BO OK AND IN THE SAME, WE FIND THAT THE ASSESSEE IS DEALING IN 10 SPECIFIC ITEMS AND 11 TH ITEM IS MISCELLANEOUS ITEMS. THE VALUE OF THE MISCELLANEOUS ITEMS IS VERY SMALL BECAUSE WE FIND THAT OUT OF TOTAL CLOSING STOCK OF RS.33.41 LAKHS, THE CLOSING STOCK OF MISCELLANEOUS ITEMS IS ONLY RS.1.82 LAKHS. THE CLOSING QUANTITY IS 2860 WHEREAS THE QUANTITY OF PU RCHASE AND SALE OF MISCELLANEOUS ITEM IS 92665 AND 64524 RESPECTIVELY AND HENCE VALUE OF PURCHASE AND SALE OF MISCELLANEOUS ITEMS CANNOT BE MORE THAN RS.4-5 LAKHS. ALTHOUGH T HE PRESENT AGE IS THE COMPUTER AGE AND HENCE MAINTAINING DAY-TO-DAY STOCK REGISTER EV EN ITEM-WISE IS ALSO FEASIBLE AND POSSIBLE, BUT EVEN IF THE ASSESSEE MAINTAINS STOCK REGISTER MANUALLY, MAINTAINING OF ITEMS-WISE REGISTER IS POSSIBLE SUCH AS ONE ITEM FO R ALL TYPES OF SAREES ETC. ALTHOUGH, UNDER THE SAME ITEM THERE WILL BE VARIOUS SUB-ITEMS HAVING DIFFERENT PRICES. BUT, EVEN IF STOCK- REGISTER IS MAINTAINED ITEM-WISE, AT LEAST C LOSING STOCK QUANTITY OF TOTAL SAREES, TOTAL SHIRTING, SUITS, DHOTIS ETC. CAN BE KNOWN FORM SUCH STOCK REGISTER AND, THEREAFTER PRICE- WISE BREAK-UP OF SUCH CLOSING STOCK CAN BE OBTAINED ON THE BASIS OF PHYSICAL STOCK TAKING ON THE DATE OF BALANCE-SHEET. IF SUCH ITEM-WISE ST OCK REGISTER IS MAINTAINED, THE RELIABILITY AND CORRECTNESS OF THE PHYSICAL STOCK STATEMENT BEI NG PREPARED BY THE ASSESSEE CAN BE CROSS-CHECKED, BUT THE ASSESSEE IS NOT EVEN MAINTAI NING ITEM-WISE STOCK REGISTER AND CONSIDERING ALL THESE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE BOOK RESULT OF THE ASSESSEE CANNOT BE ACCEPTED AND THE INCOME OF THE ASSESSEE HAS TO BE ASSESSED ON THE BASIS OF BEST JUDGMENT ASSESSMENT O NLY. 7. NOW, WE EXAMINE AND DECIDE THE ALTERNATIVE CONTE NTION OF THE ASSESSEE THAT ESTIMATING OF THE INCOME OF THE ASSESSEE AT 4% OF T URNOVER IS EXCESSIVE. IN THIS REGARD, WE FIND THAT THE AO HAS ESTIMATED THE NET PROFIT OF THE ASSESSEE COMPANY @ 5% OF TURNOVER AND THE CIT(A) HAS ESTIMATED THE NET PROF IT OF THE ASSESSEE COMPANY @ 4% OF THE TURNOVER, BUT IN THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION, THAT IN ITA NO.4625/DEL./2009 (AY : 2005-06) 5 THE FACTS OF THE PRESENT CASE, ESTIMATION OF GROSS PROFIT IS MORE SUITABLE AS COMPARED TO ESTIMATION OF NET PROFIT BECAUSE OBJECTIONS OF THE AO ARE MAINLY REGARDING CORRECTNESS OF THE CLOSING STOCK AND PURCHASES DECLARED BY THE ASS ESSEE. SALES DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE AO ALTHOUGH HE HAD MADE SO ME ADVERSE COMMENTS WITH REGARD TO THE CASH MEMOS AND CREDIT MEMOS ALSO. HIS OTHER OBJECTION IS REGARDING LINKING OF PURCHASE WITH SALES AND THIS OBJECTION OF THE AO AL SO SUPPORTS ESTIMATING OF GROSS PROFIT AND NOT FOR NET PROFIT ESTIMATION. REGARDING EXPEN SES CLAIMED BY THE ASSESSEE OTHER THAN PURCHASE, THE OBJECTIONS OF THE AO IS ONLY WITH REG ARD TO SALARY AND WAGES. FROM THE SALARY VOUCHERS FOR THE MONTH OF APRIL, 2004 AND MA RCH, 2005 AVAILABLE IN THE PAPER BOOK, WE FEEL THAT THE SAME ARE IN ORDER AND HENCE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF SALARY PAYMENT HAS TO BE ALLOWED BECAUSE APART FORM SOME ADVERSE COMMENTS REGARDING MAINTENANCE OF SALARY WAGES VOUCHERS, NO ADVERSE COMMENT IS THERE OF THE AO FOR OTHER EXPENSES. OUT OF TOTAL EXPENSES OF RS.19 ,27,873/- CLAIMED BY THE ASSESSEE IN THE P&L A/C, RS.5.86 LAKHS IS SPENT ON SALARY AND W AGES AND RS.4.80 LAKHS WERE SPENT ON DIRECTORS SALARY. OTHER EXPENSES ARE ON ACCOUNT O F INSURANCE, BANK CHARGES AND INTEREST, INTEREST ON LOAN, TELEPHONE EXPENSES, ADVERTISEMENT EXPENSES, VEHICLE RUNNING AND MAINTENANCE, REBATE AND DISCOUNTS ETC. WE DO NOT F IND ANY REASON TO MAKE ANY DISALLOWANCE OUT OF THESE EXPENSES BECAUSE NO ADVER SE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO EXCEPT BRINGING ON RECORD ADVERSE MATERIAL TO JUSTIFY ESTIMATION OF THE GROSS PROFIT SHOWN BY THE ASSESSEE AND HENCE, WE PR OCEED TO ESTIMATE THE GROSS PROFIT OF THE ASSESSEE AS AGAINST NET PROFIT ESTIMATED BY THE AO @ 5% AND BY THE CIT(A) @ 4%. IN THE PRESENT YEAR, THE ASSESSEE HAS REPORTED GROS S PROFIT OF 16.81% AS AGAINST 16.05% REPORTED IN THE PRECEDING YEAR. CONSIDERING THE FA CTS OF THE PRESENT CASE, WE FEEL THAT ADOPTING 18% G.P. IN THE PRESENT YEAR AGAINST 16.0 5% IN THE PRECEDING YEAR WILL MEET THE ENDS OF THE JUSTICE IN THE PRESENT CASE. WE ORDER ACCORDINGLY. WE DIRECT THE AO TO ESTIMATE THE G.P. OF THE ASSESSEE IN THE PRESENT YE AR @ 18% OF THE TURNOVER. THE RESULTANT G.P. WILL COME TO RS.2135003/- AS AGAINST G.P. OF R S.19,94,393/- DECLARED BY THE ASSESSEE IN THE P&L A/C. HENCE, THERE SHOULD BE AN ADDITION OF RS.140,610/- AND TAXABLE INCOME WILL BE OF RS.222,540/- AS AGAINST RS.81,980/- DECL ARED BY THE ASSESSEE. IN PERCENTAGE TERMS, IT COMES TO 1.88% OF TURNOVER. ITA NO.4625/DEL./2009 (AY : 2005-06) 6 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND PARTLY ALLOWED. 9. ORDER PRONOUNCED IN OPEN COURT ON 26.03.2010. SD/- SD/- (I.P. BANSAL) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: MARCH 26, 2010. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A), GHAZIABAD. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT