Income Tax Officer Ward-1(2), RAIPUR V. SHRI Nirmal Kumar Khetpal,(Huf), RAIPUR

ITA 47/BIL/2011

• Counselvise Citation: 4724714 RSA 2011
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J JAIN
• Keywords: Rejection of books of accounts
• Section: 68; 145

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,BENCH -RAIPUR . .. . . .. . , ,, , ! ! ! !, ,, , . .. . . .. . BEFORE S/SH.H.L.KARWA,PRESIDENT AN D RAJENDRA,ACCOUNTANT MEMBER ./ ITA NO.47/BLPR/2011- # # # # / // / ASSESSMENT YEAR -2007-08 INCOME-TAX OFFICER, WARD 1(2), RAIPUR. V/S. SHRI NIRMAL KUMAR KHETPAL (HUF), PROP. DULHAN SUITS & SAREES, 48, NEW CLOTH MARKET, PANDRI, RAIPUR. PAN: AABHN 0542 F ( ) / // / APPELLANT ) ( *+) / RESPONDENT ) REVENUE BY : SH.D.J. JAIN, D.R. ASSESSEE BY : NONE - /DATE OF HEARING : 22-12-2014 - /DATE OF PRONOUNCEMENT : 22 -12-2014 # # # # , 1961 1961 1961 1961- - - - 254 254254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM < << < = = = =, ,, , ! ! ! ! : CHALLENGING THE ORDER DT. 29.11.2010 OF THE CIT(A), RAIPUR, THE AO HAD RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.10,61,738/- MADE BY THE AO ON TRADIN G RESULT DECLARED BY THE ASSESSEE. 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.15,24,206/- MADE BY THE AO U/S. 68 O F THE I.T. ACT, 1961. 3. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH IN LA W AND ON FACTS. ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 31.03.2008 DECLARING TOTAL INCOME OF RS.3,02,650/-. THE AO COMPLETED THE ASSESSMENT ON 3 0.12.2009U/S.143(3)OF THE ACT,DETERMINING HIS INCOME AT RS.30,16,090. AGGRIEVED BY THIS ORDER, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (A) WHO PARTLY ALLOWED THE APPE AL OF THE ASSESSEE. 2. FIRST GROUND OF APPEAL IS DIRECTED AGAINST AN ADDIT ION OF RS.10,61,738/- MADE TO THE DECLARED TRADING RESULTS.ACCORDING TO THE AO, ON SALES OF RS.2,52,45 ,082/-, THE GP SHOWN BY THE ASSESSEE WORKED OUT TO 18.79% AS AGAINST 20.37% SHOWN IN THE LAST YEAR. HE FOUND THAT THE SALES SHOWN INCLUDE STOCK OF RS.15,24,206/-FOUND SHORT DURING SURVEY AND CASH BA LANCES AS ON 18.08.2006 WAS INCREASED BY THE CORRESPONDING AMOUNT.WHEN CONFRONTED TO JUSTIFY THE TRADING RESULTS, IN PROCEEDINGS BEFORE THE AO, IT WAS SUBMITTED THAT THE NP HAD INCREASED AS COMPA RED TO LAST YEAR ALTHOUGH THERE WAS SLIGHT DECLINE IN GP PERCENTAGE AND DESPITE SUBSTANTIAL INCREASE I N SALES BY 43%, THE OVERALL GP AND NP THIS YEAR HAD INCREASED AS COMPARED TO EARLIER YEARS.ACCORDIN G TO THE AO,QUANTITATIVE DETAILS WERE NOT MAINTAINED AND THAT SALES WERE NOT OPEN TO COMPLETE VERIFICATION AS THE SALES WERE SHOWN WITHOUT MENTIONING THE QUANTITY AND QUALITY OF THE ITEMS SO LD.AS A RESULT, THE BOOK RESULTS WERE REJECTED BY THE AO BY INVOKING PROVISIONS OF SECTION 145 OF TH E ACT.HE ESTIMATED GP AT 23% AS AGAINST 18.79% SHOWN BY THE ASSESSEE.IT RESULTED IN THE IMPUGNED A DDITION OF RS.10,61,738/- TO THE DECLARED TRADING RESULTS. 2.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM THE ASSESSEE SUBMITTED TH AT THE REASONS GIVEN BY THE AO WERE NOT ENOUGH FOR INVOKING PROVISIONS OF SECTION 145 OF TH E ACT,THAT THE BOOKS COULD BE REJECTED ONLY IF SPECIFIC DEFECTS WERE FOUND AND THE DEFECTS SHOULD BE OF THE NATURE OF INFLATION OF PURCHASE OR SUPPRESSION OF SALES/RECEIPTS,THAT THE AO HAD NOT DETECTED ANY SUCH SERIOUS OMISSIONS OR COMMI - SSIONS,THAT REJECTION OF BOOK RESULTS WAS DONE LIGH T HEARTEDLY WAS NOT JUSTIFIED,THAT THE ASSESSEE WAS 2 ITA NO. 47/BLPR/11-NKKHETPAL DEALING IN SALWAR SUITS AND SAREES AND THERE WERE N UMEROUS QUALITIES AND VARIETIES OF ITEMS DEALT WITH WHICH WERE MORE THAN 1000 IN NUMBER,IT WAS NEITHER PRACTICABLE NOR POSSIBLE TO MAINTAIN QUANTITATIVE DETAILS, THAT THE SAID FACTOR ALONE IN THE ABSENCE OF SOMETHING MORE COULD NOT JUSTIFY REJECTION OF BO OK RESULTS AND RESORTING TO AD HOC ESTIMATIONS,THAT AL L THE CASH BILLS MENTIONED BY THE AO CONTAINED THE DETAILS OF THE QUANTITY AND QUALITY,THAT THE AOS P RESUMPTION IN THIS REGARD WAS INCORRECT,THAT THE GP COULD NOT BE ALIKE AND UNIFORM IN ALL THE YEARS,THA T EARNING OF PROFIT DEPENDED UPON VARIOUS FACTORS AND CIRCUMSTANCES AND MARKET CONDITIONS,THAT SLIGHT DECLINE IN GP AS COMPARED TO LAST YEAR WITHOUT SOMETHING MORE COULD NOT BE THE YARDSTICK TO RESORT TO ADHOC ESTIMATED ADDITIONS TO THE AUDITED BOOK RESULTS,THAT NO EVIDENCE WAS BROUGHT ON RECORD TO S UBSTANTIATE ESTIMATION OF GP AT 23% AS AGAINST 18.79% SHOWN BY THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT THERE WAS SUBSTANTIAL INCREASE OF 43% IN SALES DURING THE YEAR UNDER APPEAL AS COMPARED TO EARLIER YEARS AND THAT EXPLAINED THE SLIGHT DECLINE IN THE GP AS COMPARED TO LAST YEAR,THAT THE ARGUMENT OF THE ASSESSEE THAT IT WAS NEITHER PRACTICABLE NOR POSSIB LE TO MAINTAIN QUANTITATIVE DETAILS WAS ACCEPTABLE,THAT THE STOCKS FOUND SHORT DURING SURVE Y WAS TAKEN IN BOOKS IN THE FORM OF CASH SALES AND THE CASH BALANCE AS ON THE DATE OF SURVEY WAS CORRE SPONDINGLY INCREASED,THAT BEYOND THAT NO SUPPRESSION IN SALES OR INFLATION IN PURCHADES,MUCH LESS ANY SERIOUS DISCREPANCY, WAS DETECTED BY THE AO,THAT THE ASSESSMENT OF THE INCOME HAD TO BE MADE ON AVAILABLE EVIDENCES AS PER S.143(3)(II) OF THE ACT, THAT IN THE CASE UNDER CONSIDERATION THE EVIDE NCE PRODUCED BY THE ASSESSEE WAS NOT PROVED AS FALSE,THAT IT WAS NOT THE CASE OF THE AO THAT THE EVIDENCE REQUIRED BY HIM, IF ANY, WAS NOT PRODUCED BY THE ASSESSEE,THAT NO MATERIAL WHATSOEVER WAS GAT HERED BY THE AO TO SUBSTANTIATE ESTIMATION OF THE GP,THAT THE IMPUGNED ESTIMATED ADDITION MADE BY THE AO, BEING NOT IN ACCORDANCE WITH THE PROVISIONS OF S.14(3)(II) OF THE ACT,WAS NOT SUSTAI NABLE.HE FURTHER HELD THAT NO EVIDENCE WAS BROUGHT ON RECORD TO CONCLUSIVELY PROVE THAT THE ASSESSEE H AD EARNED MORE THAN THAT WAS SHOWN AS PER AUDITED BOOKS OF ACCOUNT AND THE ADHOC ESTIMATION OF GP AT 23% AS AGAINST 18.79% SHOWN BY THE ASSESSEE WAS ALSO NOT BACKED BY ANY EVIDENCE ON RECORD,THAT REJECTION OF BOOK RESULTS, APPLICATION OF PROVISIONS OF SECTION 145 OF THE ACT AND ESTIMATION OF GP IN THE MANNER IN WHICH IT WAS DONE BY THE AO WAS NOT SUSTAINABLE,THAT THE AO HAD NOT REFERRED TO ANY MATERIAL OR ANY EVIDENCE IN SUPPORT OF ESTIMATION OF THE GP AT 23% AS AGAINST 18.79% SHOWN BY THE APPELLANT.FINALLY,HE DELETED THE ADDITION OF RS.10,61,738/- MADE BY THE AO. 2.2. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THAT THE ASSESSEE HAD NOT FILED QUANTITIVE DETAILS,THAT FALL IN GP WAS NOT EXPLAINED TO THE SA TISFACTION OF THE AO,THAT THERE WAS SHORTAGE IN THE PHYSICAL STOCK,THAT THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 145 OF THE ACT.AS STATED EARLIER,NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE CONSIDERED THE MATERIAL AVAILABLE ON RECORD .WE FIND THAT THE ASSESSEE IS DEALING IN SAREES AND DRESS MATERIAL,THAT DURING THE SURVEY DISCREPANCY I N THE STOCK WAS FOUND,THAT THE AO HAD REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE P ROVISIONS OF SECTION 145 OF THE ACT.IT IS A FACT TH AT THERE WAS SLIGHT FALL IN GP RATE DURING THE YEAR,BU T THAT FACT DOES NOT IPSO FACTO PROVE THAT THE BOOK S OF ACCOUNTS WERE LIABLE TO BE REJECTED.THERE CAN BE MA NY A REASONS FOR FALL IN GP IT MAY VARY FROM YEAR TO YEAR AND SEASON TO SEASON ESPECIALLY IN THE BUSI NESS OF DRESS MATERIAL. FOR ENHANCING THE GP RATE CONCERTE EVIDENCES HAVE TO BE BROUGHT ON RECORD.IN THE CASE UNDER CONSIDERATION,THE AO HAS NOT DISCUSSED ANY COMPARABLE CASE BEFORE ENHANCING GP.W E ALSO FIND SUBSTANCE IN THE ARGUMENT THAT IN THE BUSINESS OF SAREES AND DRESS MATERIAL IT IS NOT PRACTICABLE TO MAINTAIN PERFECT DETAIL OF STOCK FO R A PERSON LIKE THE ASSESSEE.THE AO HAD NOT POINTED OUT ANY DEFECTS IN THE BOOKS THAT COULD JUSTIFY THE EXTREME STEP TAKEN BY HIM I.E.REJECTION OF BOOKS AN D ESTIMATION OF HIGHER GP.WE FIND THAT ON SIMILAR KIND OF FACTS,IN THE CASE OF G. V. D. I. AND CO. (3 63 ITR 27),THE HONBLE MADRAS HIGH COURT HAS HELD AS UNDER THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNT EITHER ON THE GROUND OF DIFFERENT INVISIBL E LOSS PROJECTED OR ON THE ACCOUNT OF DAY-TO-DAY STOC K BOOK NOT BEING MAINTAINED. THE GROUNDS GIVEN BY THE ASSESSING OFFICER TO SUSTAIN HIS PROPOSAL TO AD OPT THE PROFIT AS DISCLOSED IN THE IMMEDIATELY PRECEDING YEAR, DID NOT REST ON ANY OF THE CONSIDER ATION OR MATERIALS, WHICH WERE NECESSARY FOR THE 3 ITA NO. 47/BLPR/11-NKKHETPAL PURPOSE OF REJECTING THE CASE OF THE ASSESSEE. THE REVENUE HAD NOT PROVED THE CASE BY ANY SUBSTANTIVE MATERIALS THAT THE GROSS PROFITS DISCLOSED WAS LOW. THUS, THERE WAS NO JUSTIFIABLE GROUND TO ACCEPT TH E REVENUE`S CASE.CONSEQUENTLY, WHEN THE ASSESSEE HAD EXPLAINED THE REASON FOR FALL IN THE GROSS PROFIT, THE REVENUE SHOULD HAVE TAKEN THE MATTER FURTHER FO R VERIFICATION TO REST ITS DECISION WHY THE GROSS PROFIT DISCLOSED WAS NOT ACCEPTED BY IT. IN THE CASE UNDER CONSIDERATION THERE IS NO MATERIA L THAT CAN PROVE THAT THE ALLEGATION MADE BY THE AO WERE SUPPORTED BY POSITIVE MATERIAL. IN OUR OPINION ,THE ASSESSEE HAD EXPLAINED THE REASONS OF FALL IN GP AND SAME WERE CONVINCING AND BELIEVABLE.THE AO H AD NOT REBUTTED THEM.IN THESE CIRCUMSTANCES,IF THE FAA DELETED THE ADDITION THEN NO FAULT CAN BE FOUND WITH HIS DECISION. CONFIRMING HIS ORDER,WE DECIDE GROUND NO.1 AGAINST THE AO. 3. GROUND NO.2 DEALS WITH ADDITION OF RS.15,24,206/-, MADE U/S 68 OF THE ACT. DURING SURVEY, STOCK WORTH THE ABOVE SUM WAS FOUND SHORT WHICH WAS ACCOU NTED BY THE APPELLANT IN IT BOOKS AS UNRECORDED SALES,AS THE SHORTAGE WAS ACCOUNTED BY C REDITING SALES ACCOUNT. ACCORDING TO THE AO, THE APPELLANT COULD NOT ESTABLISH THE PRESENCE OF CASH DURING THE COURSE OF SURVEY AND HENCE, THE SAID SUM OF RS.15,24,206/- WAS ADDED,U/S 68 OF THE ACT,T O THE TOTAL INCOME OF THE ASSESSEE. 3.1. IN THE APPELLATE PROCEEDINGS BEFORE THE FAA,THATASS ESSEE CONTENDED THAT THE AMOUNT OF SHORTAGE OF STOCK WAS NOT IN DISPUTE,THAT THE SHORTAGE WAS D ETERMINED DURING SURVEY AND THE SAME WAS ACCORDINGLY ACCOUNTED BY DEBITING CASH AND CREDITIN G THE SALES ACCOUNT AND THAT WAY THE DISCREPANCY FOUND DURING SURVEY STOOD ACCOUNTED FOR,THAT THE SH ORTAGE IN STOCK REPRESENTED UNACCOUNTED SALES AND THE SALE PROCEEDS WERE NOT ACCOUNTED IN THE BOOKS,T HAT UNACCOUNTED SALES WERE RECORDED IN THE BOOKS,THAT THE CREDIT OF RS.15,24,206/- WAS ON ACCO UNT OF REALISATION OF SALE PROCEEDS OF UNRECORDED SALES BROUGHT INTO THE BOOKS; THAT THE SHORTAGE OF STOCK FOUND DURING SURVEY WAS ACCOUNTED FOR IN THE BOOKS AS SALES AND THE GP DISCLOSED IN THE BOOKS IN CLUDE THE GP ON SUCH SHORTAGE ALSO. THE FAA HELD THAT ACCORDING TO THE AO THE SHORTAGE OF STOCK FOUND AS ON THE DATE OF SURVEY WAS RECORDED AS SALES ON THE NEXT DAY,THAT THE ENTIRE A MOUNT OF SALES WERE OFFERED TO TAX,THAT IT WAS NOT THE CASE OF THE AO THAT THE ASSESSEE HAD NOT INCLUDED T HE AMOUNT OF RS.15,24,206/- IN THE SALES OF RS.2,52,45,082/- WHICH WERE INCLUSIVE OF THE IMPUGN ED SALES OF RS.15,24,206/-,THAT THE AO SHOULD NOT HAVE RESORTED TO INVOKE PROVISIONS OF S.68 OF T HE ACT TO MAKE A SEPARATE ADDITION OF RS.15,24,206/-. 3.2. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO.AFTE R CONSIDERING THE MATERIAL ON RECORD,WE ARE OF THE OPINION THAT SINCE THE PROFIT ELEMENT ON THE VALUE OF SHORTAGE HAD ALREADY BEEN ASSESSED BY THE AO HE SHOULD ALSO HAVE GIVEN THE CREDIT FOR INFLOW OF CASH ON ACCOUNT OF SUCH SALES.IN OUR OPINION,THE CASH RELATING TO THE SALES WAS NOT RECORDED IN THE BOOKS OF ACCOUNT INITIALLY,BUT LATER ON IT FOUND PL ACE IN THE BOOKS,THEREFORE THE AMOUNT OF RS.15,24,206/- CANNOT BE HELD TO BE REPRESENTING UNACCOUNTED CASH.IT HAS TO BE REMEMBERED THAT IT IS NOT A CASE OF EXCESS STOCK-RATHER DURING THE COURSE OF SURVEY PHYSICAL STOCK WAS FOUND LESS THAN THE BOOK STOCK.T HE ASSESSEE ACCOUNTED THE DIFFERENCE IN THE STOCK AS CASH SALES AND PREPARED HIS SALES ACCOUNT.CONSID ERING THE ABOVE,THE FAA HAD RIGHTLY HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF THE DISPUTED SUM U/S. 68 OF THE ACT.IN SHORT,NO FURTHER ADDITION WAS CALLED FOR SINCE THE ASSESSEE HAD ALRE ADY DISCLOSED A HIGHER VALUATION OF THE CLOSING STOCK AND THEREBY HIGHER PROFIT AND HIGHER TAXABLE INCOME.AS THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY,SO,WE DECIDE GR OUND NO.2 AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. > #>< @ A - ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND ,DECEMBER,2014. - E 22 F ,2014 - . SD/- SD/- (H.L.KARWA/ . .. . . .. . ) ( ! ! ! ! / RAJENDRA) PRESIDENT/ = = = = /ACCOUNTANT MEMBER /RAIPUR. F DATE: 22.12.2014 4 ITA NO. 47/BLPR/11-NKKHETPAL - -- - *#GH *#GH *#GH *#GH IH IH IH IH / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / ) 2. RESPONDENT / *+) 3. THE CONCERNED CIT(A)/ J K , 4. THE CONCERNED CIT / J K 5. DR ITAT,RAIPUR BENCH/ H *## , . . . , 6. GUARD FILE/ . +H *# //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, RAIPUR