ITO, Rohtak V. Sh. Mohinder Kumar Prop., Rohtak

ITA 4714/DEL/2013

• Counselvise Citation: 471420114 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJANA
• Keywords: Gross profit estimation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.4714/DEL/2013 ASSESSMENT YEAR : 2010-11 ITO, WARD-2, ROHTAK. VS. MOHINDER KUMAR, PROP., M/S DURGA AGENCIES, MOHALLA MAHAJAN, ROHTAK. PAN: AAUPK8650N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAUTAM JAIN, ADVOCATE DEPARTMENT BY : SHRI P. DAM KANUNJANA, SR. DR DATE OF HEARING : 28.04.2015 DATE OF PRONOUNCEMENT : 29.04.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 31.5.2013 IN RELATION TO THE ASSESSME NT YEAR 2010-11. ITA NO.4714/DEL/2013 2 2. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION OF RS.81,01,606/-. 3. SUCCINCTLY, THE ASSESSEE IS ENGAGED IN THE TRADI NG OF SUGAR. FOR THE YEAR IN QUESTION, A TURNOVER OF RS.48.63 CRORE WAS DECLARED WITH GROSS PROFIT RATE OF 0.79%. THE CORRESPONDING FIGURES OF SALES FOR IMMEDIATELY PRECEDING FINANCIAL YEARS 2008-09 AND 2007-08 WERE RS.9.65 CRORE AND RS.10.06 CRORE RESPECTIVELY WITH GROSS PROFIT RATE OF 2.46% AND 0.88% RESPECTIVELY. AS THE GROSS PROFIT RATE FOR THE YEA R SAW A DIP IN COMPARISON WITH EARLIER TWO YEARS, THE AO CAME TO H OLD THAT THE BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED. IT WAS AL SO OBSERVED THAT THE ASSESSEE HAD SHOWN TO HAVE PURCHASED SUGAR IN CASH FOR RS.75,000/-. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE SAME W AS HELD TO BE NON- GENUINE. RESORTING TO THE PROVISIONS OF SECTION 14 5 OF THE ACT, THE AO REJECTED THE BOOKS OF ACCOUNT AND APPLIED THE GROSS PROFIT RATE OF 2.46%. THIS RESULTED INTO AN ADDITION OF RS.81,01,606/-. THE LD. CIT(A) DELETED THE ADDITION. ITA NO.4714/DEL/2013 3 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESS EE IS A TRADER IN SUGAR. THE ASSESSEE CATEGORICALLY STATED BEFORE THE AO THA T THE QUANTITATIVE DETAILS OF PURCHASE AND SALE WERE DULY KEPT BY THE ASSESSEE, WHICH FACT FINDS A MENTION ON PAGE 2 OF THE ASSESSMENT ORDER. THIS ARGUMENT HAS NOT BEEN CONTROVERTED BY THE AO. THE AO HAS REJECTE D THE BOOKS OF ACCOUNT SIMPLY ON THE REASON OF LOW GROSS PROFIT RA TE IN THE CURRENT YEAR VIS--VIS THE PRECEDING YEARS. THE ASSESSEE CITED AN EXAMPLE OF A COMPARABLE CASE OF SUNDAR LAL AJAY KUMAR BEFORE THE LD. CIT(A), WHO HAD SHOWN THE GP RATE FOR THE SAME YEAR AT 0.56% ON TURNOVER OF RS.49.34 CRORE. THE LD. CIT(A) FORWARDED SUCH DETA ILS TO THE AO ASKING FOR THE COMMENTS. CONSIDERING ALL THESE THINGS, TH E ADDITION HAS BEEN DELETED. IN OUR CONSIDERED OPINION, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION FOR THE OBVIOUS REASON THAT T HE BOOKS OF ACCOUNT CANNOT BE HELD TO BE IMPROPERLY MAINTAINED SIMPLY B ECAUSE THERE IS LOWER GROSS PROFIT RATE. IT BECOMES MORE PERTINENT WHEN THE ASSESSEE MAINTAINS QUANTITATIVE DETAILS, WHICH REMAIN UNCONT RADICTED. IN ORDER TO REJECT THE BOOKS OF ACCOUNT WHEN STOCK REGISTERS AR E MAINTAINED, IT IS ITA NO.4714/DEL/2013 4 NECESSARY FOR THE AO TO, INTER ALIA , POINT OUT THE FACTUAL INCONSISTENCIES IN THE QUANTITY AND/OR VALUE OF PURCHASES, SALES, O PENING AND CLOSING STOCK. HERE IS A CASE IN WHICH NO SUCH INCONSISTEN CIES HAVE BEEN POINTED OUT BY THE AO. WE FURTHER FIND THAT THE GP RATE OF 0.79% SHOWN BY THE ASSESSEE FAVOURABLY COMPARES WITH 0.56% ON T URNOVER OF APPROXIMATELY SAME VALUE SHOWN BY M/S SUNDAR LAL AJ AY KUMAR, WHO IS ALSO DEALING IN SUGAR. IN VIEW OF THE ABOVE DIS CUSSION, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE MAINT ENANCE OF BOOKS OF ACCOUNT AND, RESULTANTLY, DELETING THE ADDITION SO MADE BY THE AO. THE VIEW TAKEN BY THE LD. FIRST APPELLATE AUTHORITY IS COUNTENANCED AND THE GROUND IS DISMISSED. 5. THE ONLY OTHER GROUND IS AGAINST THE DELETION OF ADDITION OF RS.1,55,80,968/-. THE FACTS OF THIS GROUND ARE THA T THE ASSESSEE WAS CALLED UPON TO FURNISH DETAILS OF EXPENSES TOWARDS FREIGHT ON PURCHASES, LOADING CHARGES, WEIGHT SHORT, QUALITY CLAIM, RATE DIFFERENCE, STATIONERY AND CONVEYANCE ETC. THESE EXPENSES TOTA LED RS.1.55 CRORE. THE AO DISALLOWED THE ENTIRE AMOUNT ON THE GROUND O F NON-PRODUCTION ITA NO.4714/DEL/2013 5 OF ANY RELIABLE AND SUSTAINABLE EVIDENCE. THE LD. CIT(A) ORDERED FOR THE DELETION OF ADDITION. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE AO HAS DISALLO WED EXPENSES ON FREIGHT ON PURCHASES AND LOADING, ETC., WHICH FORM PART OF TRADING ACCOUNT. SUCH EXPENSES TOTAL RS.1.44 CRORE. ONCE A PARTICULAR GROSS PROFIT RATE IS APPLIED, THERE REMAINS NO LOGIC IN S EPARATELY MAKING ADDITION TOWARDS SOME ITEMS OF TRADING ACCOUNT. W HILE DEALING WITH THE FIRST GROUND, WE HAVE ACCEPTED THE PROPER MAINT ENANCE OF ACCOUNTS. THE AO HAS GENERALIZED THE THINGS BY STATING THAT R ELIABLE EVIDENCE IN SUPPORT OF EXPENSES WAS NOT FILED. HE HAS NOT SPECI FICALLY POINTED TOWARDS LACK OF OR IMPROPER EVIDENCE. WE FURTHER DO NOT FIND ANY SUBSTANCE IN THE ACTION OF THE AO IN DISALLOWING TH E ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE. THE INVOCATION OF SECTION 40(A)(IA) BY THE AO IS, AGAIN, UNBACKED BY ANY MATERIAL TO INDICATE THA T THE ASSESSEEE WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS, WHICH IT FAILED TO DO. THERE IS NO MENTION OF ANY SPECIFIC PROVISION UNDER WHICH THE ASSESSEE ITA NO.4714/DEL/2013 6 WAS REQUIRED TO DEDUCT TAX AT SOURCE, WHICH IT FAIL ED TO. HERE AGAIN, THE THINGS HAVE BEEN STATED GENERALLY WITHOUT REFERENCE TO ANY SPECIFIC AMOUNT REQUIRING DEDUCTION OF TAX AT SOURCE UNDER A PARTICULAR SECTION. IN OUR CONSIDERED OPINION, THE LD. CIT(A) WAS JUSTIFIE D IN DELETING THIS ADDITION. ERGO, WE UPHOLD THE SAME. THIS GROUND ALS O FAILS. 7. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.201 5. SD/- SD/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 29 TH APRIL, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.