The ITO, Ward-10(2), Ahmedabad V. Shri Deepak Devrajbhai Bahirwani, Ahmedabad

ITA 465/AHD/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9573 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Rejection of books of accounts

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ././ ./ ITA NO. 465/AHD/2012 / ASSESSMENT YEAR: 2008-09 ITO, WARD-10(2), AHMEDABAD V/S. SHRI DEEPAK DEVRAJBHAI BAHIRWANI, PROP. M/S. DEV ENTERPRISES, 514, LOHABHAVAN, OLD HIGH COURT LANE, ASHRAM ROAD, AHMEDABAD PAN : ADTPB 9357 R / // / (APPELLANT) / // / (RESPONDENT) REVENUE BY : SHRI M.K. SINGH, SR.DR. ASSESSEE(S) BY : NONE !' # $%&/ // / DATE OF HEARING : 25/05/2015 '( # $%& / // / DATE OF PRONOUNCEMENT: 29/05/2015 )* )* )* )*/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE REVENUE AND IS DIREC TED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS )-XVI, AHMEDABAD DATED 12.12.2011, PERTAINING TO ASSESSMENT YEAR 200 8-09. 2. IN THIS APPEAL BY THE REVENUE, FOLLOWING GROUNDS WERE RAISED:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.7,81,028/- MADE ON ACCOUNT OF FALL IN G.P. WITHO UT CONSIDERING THAT THE ASSESSEE WAS NOT MAINTAINING ITEM WISE REGISTER , SEPARATELY FOR REGULAR BUSINESS AND CONSIGNMENT SALES. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.4,38,011/- MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK WITHOUT CONSIDERING THAT THE ASSESSEE HAS WORKED OUT THE CL OSING STOCK AT AN ITA NO. 465/AHD/2012 ITO VS. SHRI DEEPAK DEVRAJBHAI BAHIRWANI FOR AY 2008-09 2 AVERAGE RATE OF RS.34.80 WHEREAS THE QUANTITY REMAI NED WITH THE ASSESSEE WAS NOT MORE THAN THE PURCHASES MADE DURING THE MON TH OF MARCH 2008. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. C IT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET-ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE REST ORED TO THE ABOVE EXTENT. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSEE DERIVES IN COME FROM RETAIL AND WHOLESALE BUSINESS OF IRON AND STEEL. FOR THE YEAR UNDER CONSIDERATION, ON THE SALE OF RS.10.24 CRORES, THE ASSESSEE DISCLOSED GROSS PROFIT OF RS.27.47 LACS WHICH WORKS OUT TO 2.62%. IN THE IMMEDIATELY PRECEDING YEAR, THE SALE WAS RS.3.45 CRORES AND GROSS PROFIT WAS RS.15.52 LA CS WHICH WORKED OUT TO 4.5%. THE ASSESSING OFFICER FOUND THE GROSS PROFIT TO BE LOW AS COMPARED TO PRECEDING YEAR AND HE ALSO FOUND THAT THE ASSESS EE VALUED THE CLOSING STOCK AT A RATE LOWER THAN SOME OF THE PURCHASES IN THE MONTH OF MARCH 2008. THE ASSESSING OFFICER WAS ALSO OF THE OPINION THAT THE ASSESSEE DID NOT MAINTAIN THE PROPER QUANTITATIVE RECORD. HE, THEREF ORE, REJECTED THE BOOKS OF ACCOUNTS AND APPLIED THE GP RATE OF 3.14% AS AGAINS T 2.62% DISCLOSED BY THE ASSESSEE WHICH RESULTED IN THE ADDITION OF RS.7,81, 082/-. HE ALSO REVISED THE VALUE OF CLOSING STOCK AND MADE THE ADDITION OF RS. 4,38,011/- TO THE VALUE OF CLOSING STOCK. BOTH THESE ADDITIONS HAVE BEEN DELE TED BY THE CIT(A), AFTER THE DETAILED DISCUSSION OF FACTS AS WELL AS LAW FRO M PAGE NOS. 2 TO 13 OF HIS ORDER. THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT(A) IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. DEPART MENTAL REPRESENTATIVE ARGUED AT LENGTH. HIS ARGUMENTS ARE CAREFULLY CONS IDERED AND WE HAVE ALSO GONE THROUGH THE ORDERS OF THE ASSESSING OFFICER AS WELL AS CIT(A). AFTER ITA NO. 465/AHD/2012 ITO VS. SHRI DEEPAK DEVRAJBHAI BAHIRWANI FOR AY 2008-09 3 CONSIDERING THE ORDERS OF THE LOWER AUTHORITIES AND THE ARGUMENTS OF LD. DEPARTMENTAL REPRESENTATIVE, WE DO NOT FIND ANY JUS TIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A). THE MAIN GROUND FOR R EJECTION OF BOOKS OF ACCOUNTS AS WELL AS FOR MAKING ADDITION TO THE CLOS ING STOCK WAS THE IMPROPER MAINTENANCE OF THE RECORD OF THE CLOSING S TOCK AND IMPROPER VALUATION OF CLOSING STOCK. THE CIT(A) HAS RECORDED THE FINDING THAT THE APPELLANT WAS MAINTAINING ITEM-WISE AS WELL AS DATE -WISE QUANTITATIVE STOCK REGISTER FOR THE TRADED ITEMS AND THE ASSESSING O FFICER HAD NOT NOTICED ANY DEFECT IN THE STOCK REGISTER. THE ABOVE FINDIN GS OF THE CIT(A) HAS NOT BEEN CONTROVERTED BEFORE US BY THE REVENUE. THE BO OKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED BY THE CHARTERED ACCOUNTANT AN D HE HAS NOWHERE QUALIFIED THAT THE ASSESSEE HAS NOT PROPERLY MAINTA INED THE DAY TO DAY STOCK REGISTER OR THE CLOSING STOCK IS NOT PROPERLY VALUE D. MOREOVER, WE FIND THAT FOR WORKING OUT THE GP, THE ASSESSING OFFICER HAS W ORKED OUT THE AVERAGE COST OF PURCHASES OF RAW-MATERIAL AS WELL AS AVERAG E COST OF SALES AND THEN HAS WORKED OUT THE AVERAGE PROFIT. THE SAME IS REP RODUCED BELOW:- AVERAGE COST OF NET PURCHASE : 11,00,60,747/34666 65 = RS.31.82 (VALUE) (QTY) AVERAGE COST OF SALES :11,37,98,448/3466359 = RS.32.82 (VALUE) (QTY) THEREFORE, THE AVERAGE PROFIT RATIO IS WORKED OUT AT : 32.82/31.82X100=103.14, I.E. @ 3.14 % 5. FROM THE ABOVE, IT IS EVIDENT THAT THE TOTAL QUA NTITY OF THE PURCHASES AS WELL AS SALES WAS DULY AVAILABLE ON RECORDS OF T HE ASSESSING OFFICER. AS PER THE ASSESSING OFFICER, THE AVERAGE COST OF PURC HASES IS RS.31.82/KG AND THE AVERAGE COST OF SALES IS RS.32.82/KG. NOW, THE ASSESSING OFFICER HAS VALUED THE CLOSING STOCK AT THE RATE RANGING BETWEE N RS.38.73/KG AND RS.44.75/KG. THE SAME IS EVIDENT FROM PARAGRAPH 6.1 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR READY REFERENCE. ITA NO. 465/AHD/2012 ITO VS. SHRI DEEPAK DEVRAJBHAI BAHIRWANI FOR AY 2008-09 4 6.1 AS PER THE DETAILS OF CLOSING STOCK SUBMITTED BY THE ASSESSEE, THE VALUE AT THE AVERAGE RATE IS WORKED OUT AS UNDER:- ITEM QUANTITY AVG. RATE VALUE M.S. BEAM 30695 44.75 13,73,601/- CHANNEL 11680 41.53 4,85,070/- ANGLES 13750 38.73 5,32,537/- 56125 23,91,208/- 6. FROM THE ABOVE, IT IS EVIDENT THAT THE RATE ADOP TED BY THE ASSESSING OFFICER IS MUCH MORE THAN NOT ONLY THE AVERAGE PURC HASE RATE BUT ALSO THE AVERAGE SALES RATE. THEREFORE, THE FINDING OF THE C IT(A) THAT FOR THE PURPOSE OF VALUING CLOSING STOCK, THE ASSESSING OFFICER HAS SELECTED ON PICK AND CHOOSE BASIS SOME OF THE ITEMS OF THE PURCHASES FR OM THE MONTH OF MARCH 2008 WHERE THE PURCHASES WERE MADE AT THE HIGH RATE APPEARS TO BE CORRECT. THE ASSESSEE HAS VALUED THE CLOSING STOCK AT A RATE WHICH IS HIGHER THAN THE AVERAGE RATE OF PURCHASES AS WELL AS SALES WORKED O UT BY THE ASSESSING OFFICER HIMSELF. NO OTHER DEFECTS IN THE BOOKS OF A CCOUNTS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER. IN VIEW OF THESE FAC TS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CI T(A) WHICH IS SUSTAINED AND THE REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 29 TH MAY, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 29/05/2015 BIJU T., PS ITA NO. 465/AHD/2012 ITO VS. SHRI DEEPAK DEVRAJBHAI BAHIRWANI FOR AY 2008-09 5 )* # $+ ,)+$ )* # $+ ,)+$ )* # $+ ,)+$ )* # $+ ,)+$/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ !- / CONCERNED CIT 4. !- ( ) / THE CIT(A) 5. +01 $ , , / DR, ITAT, AHMEDABAD 6. 13 4' / GUARD FILE . )*! )*! )*! )*! / BY ORDER, TRUE COPY 5 55 5/ // / 6 6 6 6 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD