ACIT, Ajmer V. RAHUL PANCHOLI, Ajmer

ITA 464/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1992 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHANMUGA PRIYA
• Assessee Lawyers: SUNIL PARWAL
• Keywords: Rejection of books of accounts; Opportunity of being heard

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 464/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 THE ACIT, CIRCLE-2, AJMER. CUKE VS. SHRI RAHUL PANCHOLI, PROP. M/S RAHUL AGRO INDUSTRIES, JHALKARI NAGAR, ALWAR GATE, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ANPPP 5213 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT CO NO. 28/JP/2017 (ARISING OUT OF ITA NO. 464/JP/2017) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 SHRI RAHUL PANCHOLI, PROP. M/S RAHUL AGRO INDUSTRIES, JHALKARI NAGAR, ALWAR GATE, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ANPPP 5213 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SUNIL PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SRI SHANMUGA PRIYA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/03/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 07/03/2018 VKNS'K@ ORDER ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 2 PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 16.03.2017 OF LD. CIT(A), AJMER FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS:- IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A), AJMER HAS ERRED IN: 1. WHETHER LOOKING TO THE FACTS AND CIRCUMSTANCES J OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN DELETING THE TRADING ADDITION OF RS. 97,77,900/- WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BY INVOKING THE PROVISIONS OF SEC. 145(3) OF THE INCOME TAX ACT, 1961 ON THE B ASIS OF CERTAIN DEFECTS FOUND IN THE SAID BOOKS OF ACCOUNTS; 2. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELET E OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HE ARING. 2. THIS IS SECOND ROUND OF APPEAL AS THE TRIBUNAL I N THE FIRST ROUND HAS SET ASIDE THE MATTER TO THE RECORD OF THE ASSES SING OFFICER VIDE ORDER DATED 30.09.2015 IN ITA NO. 949/JP/2013 AND C O NO. 04/JP/2014 IN PARA 4.6 AS UNDER:- 4.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE GROSS PROFIT RAT E OF THE ASSESSEE HAS SUBSTANTIALLY COME DOWN FROM PRECEDING YEAR WHICH WAS NOT EXPLAINED BEFORE THE AO. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT VIDE LETTER RECEIVED ON 28-12 - 2011 BY THE ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 3 AO THAT GROSS PROFIT RATE HAS BEEN CALCULATED @ 4.3 4% WHEREAS ACTUAL GROSS PROFIT RATE AS DECLARED IN THIS YEAR I S 5.73%. NOW THE ASSESSEE HAS CLAIMED THE GROSS PROFIT RATE AT 6.62% IN THE YEAR UNDER CONSIDERATION. THE LD. AR HAS PLACED DATA OF SALE AND GROSS PROFIT AT SERIAL NO. 1 OF THE PAGE OF 1 OF PAPER BO OK WHICH SHOWS THAT ON THAT BASIS WE CAN VERIFY THE GROSS PROFIT R ATE WHICH COMES TO 5.73% DURING THE YEAR UNDER CONSIDERATION AND IT WAS AT 9.55% IN PRECEDING YEAR. THE ASSESSEE HAD MADE VALU ATION OF CLOSING STOCK AT THE AVERAGE OF RS. 67/- PER KG WHE REAS HIS AVERAGE PURCHASES OF TILL DURING THE YEAR UNDER CON SIDERATION IS AT RS. 61.11 PER KG. THE VALUATION OF THE CLOSING STOC K IS MADE AT A HIGHER PRICE WHICH ALSO INCREASED THE GROSS PROFIT MEANING THEREBY THAT GROSS PROFIT WAS LESSER THAN DISCLOSED BY THE ASSESSEE. THE LD. CIT(A) SIMPLY ACCEPTED THE SUBMIS SIONS WITHOUT MAKING ANY VERIFICATION ON THE HUGE ADDITION MADE B Y THE AO AND THERE IS NO WHISPER IN HIS ORDER THAT ON WHAT BASIS HE HAS ACCEPTED THE SALES AND PURCHASES WITHOUT ANY VERIFI CATION AND JUST ON THE SUBMISSIONS OF MADE BY THE ASSESSEE. TH E VALUATION HAS NOT BEEN SUBMITTED BY THE ASSESSEE BEFORE THE A O. THE GROSS PROFIT FIGURE SHOWN BY THE ASSESSEE IS ALSO CONTRAD ICTORY AT EVERY LEVEL. THERE WAS ALSO DISCREPANCY IN THE GROSS PROF IT DECLARED BY THE ASSESSEE IN THE RETURN FORM. THE LD. AR HAS ALS O NOT SUBMITTED THE SHORTAGE CHART AS WELL AS QUANTITY CH ART OF LAST TWO YEARS. THE LD. AR HAS ALSO NOT FILED THE COPY OF EX PLANATION BEFORE THE BENCH. HE ONLY FILED THE COPY OF THE LETTER WIT HOUT DATE AND WITHOUT ANY SIGNATURE AT SERIAL NO. 6 & 7 OF THE PA PER BOOK. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE GROUND NO . 1 OF THE ASSESSEE TO THE FILE OF THE AO TO EXAMINE IT AFRESH BY PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND THE ASSESSEE IS ALSO DIRECTED TO PRODUCE THE RELEVANT R ECORDS TO VERIFY THE QUANTITY OF SALES AND PURCHASES AS WELL AS OPEN ING AND CLOSING STOCK BEFORE THE AO AND ALSO TO PRODUCE THE BOOKS OF ACCOUNT TO VERIFY THE GROSS PROFIT RATE. FURTHER IT SHOULD BE VERIFIED FROM THE AUDITOR WHETHER HE HAS AUDITED TH E BOOKS OF ACCOUNT OR NOT. IF YES, THEN THE ASSESSEE'S EXPENSE S FOR PAYMENT ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 4 OF AUDITOR ARE ALSO REQUIRED TO BE VERIFIED. ACCORD INGLY, THIS GROUND NO. 1 OF THE REVENUE IS SET ASIDE TO THE FIL E OF THE AO FOR DE NOVO ADJUDICATION. IN SET ASIDE ASSESSMENT PROCEEDING, THE AO HELD THA T THE ASSESSEE HAS NOT REMOVED THE DEFECTS AS POINTED OUT BY THE TRIBU NAL AND ACCORDINGLY THE AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) AN D APPLIED THE ESTIMATED INCOME OF THE ASSESSEE BY APPLYING GP @ 9 .55% AS AGAINST THE GP RATE DECLARED BY THE ASSESSEE FOR THE ASSESS MENT YEAR 2008-09 @ 9.55%. ON APPEAL THE LD. CIT(A) DELETED THE ADDIT ION MADE BY THE AO BY HOLDING THAT THE AO IS NOT JUSTIFIED IN REJEC TING THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF THE ACT. THOUGH, THE LD. CIT(A) HAS CONFIRMED THE ADDITION M ADE BY THE AO ON ACCOUNT OF SHORT WEIGHT TO THE EXTENT OF RS. 16,907 /-. 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT WHEN TH E ASSESSING OFFICER HAS CLEARLY GIVEN A FINDING THAT THERE ARE VARIOUS DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THEREFORE, TH E BOOK RESULTS OF THE ASSESSEE CANNOT BE ACCEPTED. HE HAS SUBMITTED THAT AS PER THE DIRECTIONS OF THE TRIBUNAL, THE AO VERIFIED THE VAR IOUS ISSUES HOWEVER, THE ASSESSEE FAILED TO SATISFY THE CORRECTNESS OF T HE VARIOUS DETAILS REGARDING PURCHASES AND SALES CLOSING STOCK AS RECO RDED IN THE BOOKS OF ACCOUNTS. THOUGH THE ASSESSEE ALSO FAILED TO ESTABL ISH THE PROPER BASIS ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 5 ON CRITERIA FOR CLAIM OF HIGHER SHORTAGE IN WEIGHT. THE ASSESSEE HAS VALUED THE STOCK AT MARKET RATE TAKING THE SAME AT RS. 67 PER KG WHEREAS THE ACTUAL MARKET RATE OF THE STOCK WAS FOU ND TO BE IN THE RANGE OF RS. 58 TO 70 PER KG ON 31.03.2009. THUS, T HE LD. DR HAS SUBMITTED THAT THE AO WAS JUSTIFIED IN REJECTING TH E BOOKS OF ACCOUNTS AND FURTHER WHEN THE ASSESSEE ITSELF HAS DECLARED T HE GP @ 9.55% IN THE PREVIOUS YEAR THEN IT IS PROPER TO APPLY THE LA TEST GP RATE DECLARED BY THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF T HE ASSESSING OFFICER. 4. ON THE OTHER HAND, LD. AR HAS SUBMITTED THAT THE ASSESSEE PRODUCED ALL THE DETAILS AND BOOKS OF ACCOUNTS AND NO SPECIFIC DEFECT WAS FOUND BY THE AO IN THE BOOKS OF ACCOUNTS THERE FORE, THE LD. CIT(A) WAS JUSTIFIED IN REVERSING THE ORDER OF THE ASSESSI NG OFFICER IN REJECTING THE BOOKS OF ACCOUNTS. HE HAS FURTHER SUBMITTED THA T THE GP ADDITION APPLIED BY THE AO IS ALSO NOT PROPER BASIS AS THE A SSESSING OFFICER HAS ADOPTED THE HIGHEST RATE DECLARED BY THE ASSESSEE F OR LAST MANY YEARS INSTEAD OF TAKING THE AVERAGE OF THE PAST HISTORY O F GP RATE DECLARED BY THE ASSESSEE. HE HAS SUPPORTED THE ORDER OF THE LD. CIT(A) BELOW. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE NOTE THAT THOUGH THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS AND OTHER DETAILS HOWEVER THE VAL UATION OF STOCK BY ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 6 TAKING AN ESTIMATED RATE ON RS. 67 PER KG IS NOT FO UND TO BE CORRECT VALUATION WHEN THE MARKET RATE WAS RANGING 58 TO 70 PER KG ON 31.03.2009 THE ASSESSEE HAS NOT DISPUTED THAT THE A SSESSEE HAS APPLIED THE MARKET RATE IN VALUATION OF STOCK. HENCE, EVEN IF THE AVERAGE OF RS. 58 TO 70 PER KG IS TAKEN, THE SAME WOULD COME TO RS . 64 PER KG INSTEAD OF RS. 67 PER KG APPLIED BY THE ASSESSEE. FURTHER, WE FIND THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE PROPER BASIS AND CRITERIA FOR CLAIMING THE HIGHER SHORTAGE IN WEIGHT AND THIS FINDING OF T HE FACT OF THE AO HAS BEEN CONCURRED BY THE LD. CIT(A) IN PARA 5.3 AS UND ER:- 5.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STAT EMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAR EFULLY. IT IS SEEN THAT THE APPELLANT HAD CLAIM SHORT WEIGHT OF R S. 7,39,909/-. THE AO HAS ACCEPTED THE CLAIM OF THE APPELLANT EXCE PT THE CLAIM OF RS. 16,907/-. THE CLAIM OF RS. 16,907/- WAS NOT ACCEPTED BY THE AO, AS APPELLANT FAILED TO PRODUCE EVIDENCE IN SUPPORT OF THE SHORT WEIGHT CLAIM OF RS. 3,400/- IN THE CASE OF DE EP KAMAL EXPORTS. AS THE APPELLANT HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF CLAIM OF SHORT WEIGHT OF RS. 16,907/-, THEREFORE THE DISALLOWANCE OF SHORT WEIGHT CLAIM OF RS. 16,907/- MADE BY THE AO IS HEREBY CONFIRMED. THEREFORE, WHEN VALUATION OF STOCK AND THE CLAIM OF SHORT WEIGHT ARE NOT FOUND TO BE CORRECT THEN THESE TWO ASPECTS ALO NE ARE SUFFICIENT TO HELD THAT THE ASSESSEES BOOKS RESULT DO NOT REFLEC T THE TRUE AND CORRECT BUSINESS AND FINANCIAL AFFAIRS OF THE ASSESSEE. ACC ORDINGLY, WE UPHELD ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 7 THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF TH E ACT AND CONSEQUENTLY THE ORDER OF THE LD. CIT(A) IS SET ASI DE TO THAT EXTENT AND THE ORDER OF THE AO IS RESTORED. 6. AS REGARDS THE ESTIMATION OF INCOME BY APPLYING THE GP @ 9.55% WE NOTE THAT IT IS A SETTLED PROPOSITION OF LAW AS HELD BY THE HONBLE JURISDICTION HIGH COURT THAT THE PROPER BASIS OF ES TIMATION OF INCOME SHOULD BE THE PAST HISTORY OF THE GP RATE DECLARED BY THE ASSESSEE. THEREFORE, THE AVERAGE RATE OF THE PAST YEARS GP DE CLARED BY THE ASSESSEE SHALL BE TAKEN THE BASIS FOR ESTIMATION TH E INCOME OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO RE-COMPU TE THE INCOME OF THE ASSESSEE ON THE BASIS OF ESTIMATE BY TAKING THE AVERAGE GP RATE OF THE ASSESSEE FOR LAST 5 YEARS WHICH MAY INCLUDE THE EARLIER YEARS AS WELL AS SUBSEQUENT YEARS. HENCE, THIS ISSUE IS SET ASIDE TO THE RECORD OF THE AO FOR RE-COMPUTATION ON THE BASIS OF ESTIMATION BY APPLYING THE AVERAGE GP RATE OF 5 YEARS AVAILABLE. 7. IN CROSS OBJECTION THE ASSESSEE HAS RAISED THE F OLLOWING GROUNDS:- 1. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CAS E THE LD. CIT(A), AJMER HAS ERRED IN SUSTAINING ADDITION OF R S. 16,907.00 FOR SHORT WEIGHT CLAIM. 2. ANY OTHER MATTER PERMISSION WITH THE CHAIR. ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 8 THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE CROSS OBJECTION IS REGARDING THE ADDITION SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF SHORT WEIGHT TO THE EXTENT OF RS. 16,907/-. 8. WE HAVE HEARD LD. AR AS WELL AS LD. DR AND CONSI DERED THE RELEVANT MATERIAL ON RECORD SINCE, THE INCOME OF TH E ASSESSEE IS TO BE ESTIMATED BY APPLYING THE PROPER AND REASONABLE GP RATE THEREFORE, NO FURTHER ADDITION IS CALLED FOR IN RESPECT OF AN ITE M WHICH IS PART OF THE TRADING ACCOUNT OF THE ASSESSEE. THE GROSS PROFIT R ATE WOULD SUB SUM THE DEFECT IN THE CLAIM OF SHORT WEIGHT AND ACCORDI NGLY NO FURTHER ADDITION IS TO BE MADE. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2018. SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/03/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CIRCLE-2, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- SHRI RAHUL PANCHOLI, AJMER. ITA NO.464/JP/2017 & CO 28/JP/2017 ACIT V SHRI RAJUL PANCHOLI , AJMER 9 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 464/JP/2017 & CO NO. 28/JP/17} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR