ACIT, New Delhi V. M/s. R.S.Retail Stores Pvt. Ltd., New Delhi

ITA 4856/DEL/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3528 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MRS PARMITA TRIPATHY
• Keywords: Gross profit estimation; Document seized; Documents seized
• Section: 133A; 132

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 4856/DEL/2011 (ASSESSMENT YEAR: 2008 - 09 ) ACIT, CENTRAL CIRCLE - 22, NEW DELHI VS. RS RETAIL STORES PVT. LTD, 274, WESTEND MARG, VILLAGE SAIDULLAZIAB, MB ROAD, NEW DELHI PANLAACCR9494C (APPELLANT) (RESPONDENT) ASSESSEE BY : MRS. PARMITA TRIPATHY, CIT DR REVENUE BY: SH. SALIL KAPOOR, ADV DATE OF HEARING 12/04 / 2017 DATE OF PRONOUNCEMENT 18 / 04 / 2017 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THIS APPEAL IS PREFERRED BY REVENUE AGAINST THE ORDER OF THE LD CIT(A) - III, NEW DELHI DATED 24.08.2011 RAISING FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN DELETING THE ADDITION OF RS. 3519131/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOWER GROSS PROFIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 6802682/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECORDED SALES. 3. THE ORDER OF THE LD CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 2. GROUND NO. 3 AND 4 OF THE APPEAL ARE GENERAL AND SUPPORTIVE IN NATURE AND THEREFO RE, THEY ARE DISMISSED. 3. GROUND NO. 1 OF THE APPEAL IS AGAINST DELETION OF THE ADDITION OF RS. 3519131/ - ON ACCOUNT OF LOWER GROSS PROFIT. 4. THE FACTS OF THE CASE LEADING TO THE ISSUE IS THAT APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING OF BABY PRODUCTS FILED ITS RETURN ON 29.07.2008 AT INCOME OF RS. 961550/ - . SUBSEQUENTLY, ON 05.12.2007 SEARCH WAS CARRIED OUT U/S 132 OF THE INCOME TAX ACT ON KOHINOOR FOODS LTD GROUP CASES AND A WARRANT WAS ALSO ISSUED IN THE NAME OF THE COMPANY. DURING THE YEAR SALES MADE BY THE ASSESSEE WAS RS. 31253388/ - AND GROSS PAGE 2 OF 6 PROFIT RATION WAS 44.28%. AS THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT WITH BILLS AND VOUCHERS FOR VERIFICATION OF SEIZED DOCUMENTS THE LD ASSESSING OFFICER ESTIMATED THE PROFITS OF THE ASSES SEE AT THE RATE OF 55.82% BEING AVERAGE OF GROSS PROFIT FOR ASSESSMENT YEAR 2006 - 07 AND AY 2007 - 08. CONSEQUENTLY, ADDITION OF RS. 3519131/ - WAS MADE TO THE TOTAL INCOME ON ACCOUNT OF LOW GROSS PROFIT. THE ASSESSEE ON APPEAL BEFORE THE LD CIT(A), GOT RELIEF THEREFORE REVENUE IS IN APPEAL BEFORE US. 5. THE LD DR SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER AND FURTHER SAME WERE NOT AVAILABLE BEFORE THE FIRST APPELLATE AUTHORITY HENCE, THE DELETION OF THE ADDITIO N IS ERRONEOUS. SHE VEHEMENTLY RELIED UPON THE PARA NO. 12 AND 13 OF THE ORDER OF THE LD ASSESSING OFFICER. SHE ALSO STATED THAT DURING THE COURSE OF SEARCH SOME FILES WERE FOUND FROM THE LAPTOP OF THE DIRECTOR OF THE ASSESSEE AND THEREFORE, IT WAS NECESSA RY TO ADOPT THE APPROPRIATE GROSS PROFIT. 6. THE LD AR VEHEMENTLY RELIED ON ORDER OF THE LD CIT(A) AND SUBMITTED THAT ADDITION IS ON ESTIMATE BASIS AND A DETAILED REASON IS GIVEN THAT WHY THERE WAS A FALL IN THE GROSS PROFIT VIDE LETTER DATED 18.12.2009 BEFO RE THE AO. HE SUBMITTED THAT LD AO DISREGARDED THE SAME COMPLETELY. HE FURTHER SUBMITTED THAT THE IMPUGNED DOCUMENTS FOUND FROM THE LAPTOP OF THE DIRECTOR HAVE ALSO BEEN EXPLAINED TO STATE THAT SAME ARE MERELY AN ESTIMATE OF THE COST FOR KIDS LINE. HE FUR THER STATED THAT NAME OF THE FILE ITSELF SHOWS THAT. HE FURTHER REFERRED TO PAGE NO. 6 AND 7 OF THE ORDER OF THE LD CIT(A), WHERE THE CONTENTION IS INCORPORATED. FURTHER, HE RELIED ON PAGE NO. 32 OF HIS PAPER BOOK TO SHOW THE RESULT IN DIFFERENCE IN THE GR OSS PROFIT ARISING DUE TO CUSTOM D UTY, SHIPPING CHARGES ETC . THEREFORE, HE VEHEMENTLY SUBMITTED THAT ADDITION ON ACCOUNT OF GROSS PROFIT IS REQUIRED TO BE STRUCK DOWN AND RELIED UPON THE ORDER OF THE LD CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTE NTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE LD CIT(A) HAS DEALT WITH THE ABOVE DISALLOWANCE IN PARA NO . 7 AT PAGE NO. 10 AND 11 OF HIS ORDER WHICH ARE AS UNDER: - PARA 7. IN GROUND OF APPEAL NO. 4 THE APPELLANT HAS CONTESTED THE ADDITION OF RS. 35,19,131/ - MADE ON ACCOUNT OF LOW GP. PAGE 3 OF 6 THIS CONNECTION IT IS SEEN FROM THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT THAT THE GP RATE FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR 2008 - 09 AS PER THE RETURN OF INCOME IS 44.28 IN COME IS 44.28% WHILE THE SAME AS PER RETURN OF INCOME FOR AY 2007 - 08 WAS FOR 44.57% . IT IS ALSO A MATTER OF RECORD THAT THE ASSESSMENT FOR AY 2007 - 08 HAS BEEN COMPLETED ON 24.12.09 U/S 153A/143(3), WHEREIN THE GP RATE OF 44.57% FOR THIS ASSESSMENT YEAR HA S BEEN ACCEPTED BY THE AO. IT IS HOWEVER IN THE ASSESSMENT YEAR IN APPEAL THAT THE AO HAS NOT ACCEPTED THE INCOME RETURNED BASED ON GP RATE OF 44.28%. FOR THIS PURPOSE THE AO HAS RELIED UPON A DOCUMENT SEIZED FROM THE LAPTOP FROM WHERE THE GP RATE AT 49.86 % HAS BEEN WORKED OUT BY THE ASSESSEE FOR AY 2007 - 08 WHICH IS NOT RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. IN VIEW OF THESE FACTS, IT IS CLEAR THAT THERE IS NO BASIS BEFORE THE AO FOR WORKING OUT A AVERAGE GP RATE AT 55.82% (FOR AY 2008 - 09) WHICH IS CALCULATED ON BASIS OF THE AVERAGE RATE OF GP FOR AY 2006 - 07 WHICH WAS 61.78% AND FOR AY 2007 - 08 WHICH WAS FOR 49.86% AS PER THE SEIZED DOCUMENT. IN THIS CONNECTION IT IS ALSO SEEN THAT THE APPELLANT HAD DURING THE COURSE OF ASSESSMENT PROCEEDINGS REPLIED THAT THE DIFFERENCE IN GP VIS - A - VIS A.Y. 2006 - 07 IS BECAUSE OF INCREASE IN CUSTOM DUTY ON THEIR PRODUCTS. THAT EARLIER THEY GOT SOME BENEFIT FROM CUSTOMS PARTICULARLY ON BABY PRODUCTS BUT AT PRESENT THEY DO NOT GET SUCH BENEFIT. THE DECLINING GP IS ALSO DU E TO INCREASE IN LINER CHARGES AND CLEARING CHARGES. THIS REPLY OF THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS HAVE NOT BEEN FURTHER INVESTIGATED UPON BY THE AO. MOREOVER NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO AS TO WHETHER THE PURPOSES WERE INFLATED OR SALES WERE NOT RECORDED. KEEPING IN VIEW ALL THE ABOVE FACTS IN TOTALITY THERE IS NO GROUND TO REJECT THE BOOK RESULTS (WHICH IN ANY CASE IS NOT VERY DIFFERENT THAN AY 2007 - 08 ) AND ESTIMATE A GP RATE AT 55.82% BASED ON AVERAGE GP RATES OF TWO OF THE EARLIER YEARS. CONSEQUENTLY, THE ADDITION OF RS. 35,90,131 / - IS DIRECTED TO BE DELETED. 8. FURTHERMORE, THE LD ASSESSING OFFICER HAS NOT GIVEN ANY REASON THAT HOW THE IMPUGNED FILE FOUND FROM THE LAPTOP OF THE DIRECTOR COULD HAVE RESULTED INTO THE H IGHER GROSS PROFIT TO THE ASSESSEE. EVEN BEFORE US THE REVENUE COULD NOT SHOW THAT THE IMPUGNED FILE HAS ANY DETAIL OF ANY UNACCOUNTED PURCHASE OR SALE. IT COULD ALSO NOT BE THE ARGUMENT OF THE REVENUE THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUN T BECAUSE IN THE STATEMENT IT HAS BEEN CONFIRMED THAT ASSESSEE MAINTAINED BOOKS OF ACCOUNT IN TALLY SOFTWARE AND THE REVENUE DURING 133A PROCEEDINGS HAVE IMPOUNDED THE CPU. IT WAS ALSO NOT DENIED BEFORE US THAT BOOKS WERE NOT AVAILABLE BEFORE THE LD AO IN ELECTRONIC FORMAT. FROM PAGE 4 OF 6 THE IMPOUNDED MATERIAL AT PAGE NO. 81 TO 85 OF THE PAPER BOOK WHICH IS THE INVENTORY OF LOOSE DOCUMENTS AS WELL AS THE BACKUP OF THE HARD DISK , NOTHING WAS POINTED OUT BY THE AO TO SUGGEST ANY DEALINGS OF PURCHASE OR SALE OUTSIDE TH E BOOKS OF ACCOUNT. IN VIEW OF THIS WE FIND NO INFIRMITY IN THE ORDER OF THE LD CIT(A) IN DELETING THE ABOVE ADDITION OF RS. 3519131/ - ON ACCOUNT OF LOWER GP. IN THE RESULT GROUND NO. 1 OF THE REVENUE IS DISMISSED. 9. GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS AGAINST DELETION OF ADDITION OF RS. 6802682/ - ON ACCOUNT OF UNRECORDED SALES. DURING THE COURSE OF SEARCH AO NOTED THAT STOCK AS PER BOOKS OF ACCOUNT WAS FOUND OF RS. 31736103/ - AND AS PER PHYSICAL VERIFICATION IT WAS FOUND TO BE OF RS. 19549285/ - AND THEREFORE, THERE IS DIFFERENCE IN THE STOCK AMOUNTING TO RS. 12186818/ - WHICH IS SOLD OUTSIDE THE BOOKS OF ACCOUNT AND HE WORKED OUT GP @55.82% AND MADE ADDITION OF RS. 6802682/. THE ASSESSEE CONTESTED THE SAME AND LD CIT(A) DELETED THE SAME AS PER PARA NO. 8 OF HIS ORDER AT PAGE NO. 11 AND 12 OF HIS ORDER. THEREFORE, THE REVENUE IS IN APPEAL BEFORE US. 10. THE LD DR RELIED UPON THE ORDER OF THE AO WHEREAS THE LD AR RELIED UPON THE ORDER OF THE LD CIT(A). HE FURTHER STA TED THAT STATEMENT AT PAGE NO. 38 OF THE PAPER BOOK CLEARLY SHOWS A STOCK OF RS. 12186818/ - WAS LYING AT GURGAON STORE. HE REFERRED TO THE Q . NO. 9 OF THE STATEMENT OF SHRI GHOSH RECORDED ON THE DATE OF SURVEY. HE THEREFORE, SUBMITTED THAT THERE IS NO DIFF ERENCE IN THE STOCK. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE LD CIT(A) HAS DELETED THE ABOVE DISALLOWANCE/ ADDITION VIDE PARA NO. 8 AS UNDER: - 8. IN GROUND OF APPEAL NO. 5 THE APPELLANT HAS CONTESTED THE ADDITION OF RS. 68,02,6827 - BASED ON APPLICATION OF GP RATIO OF 55.82% ON UNRECORDED SALES. FROM THE AO'S ORDER AND APPELLANT'S SUBMISSION IT IS OBSERVED THAT THE ABOVE ADDITION IS BASED ON APPLYING THE GP RATE OF 55.82% (AS WORKED OUT BY THE AO & RELEVANT IN GROUND OF APPEAL NO. 1) ON THE ALLEGED DIFFERENCE IN STOCK OF RS. 1,21,86,8187 - , BY HOLDING THE SAME AS UNRECORDED SALES MADE OUT OF BOOKS OF ACCOUNT. IN THIS CONNECTION IS NOTED THAT AS PER THE INVENTORY OF STOCK TAKEN ON PHYSICAL VE RIFICATION DURING THE COURSE OF SEARCH, THE SAME WORKED OUT AT RS. 1,95,49,285 / - BUT THE STOCK AS PER BOOKS OF ACCOUNT WERE FOUND TO BE AT RS. - 3,17,36,103 / - . THE AO PAGE 5 OF 6 HAS HELD THAT THIS DIFFERENCE IN STOCK FOR RS. 1,21,86,818 / - AS SOLD OUT OF BOOKS ON WHICH G P RATE OF 55.82% HAS BEEN APPLIED. IN THIS CONNECTION FROM THE REPLY OF THE APPELLANT IT IS SEEN THAT IN THE STATEMENT RECORDED ON 05J2J37 ITSELF THE ACCOUNTANT OF THE APPELLANT COMPANY HAD STATED IN ANSWER TO QUESTION NO 9 THAT THEY HAVE ANOTHER STORE AT GURGAON WHERE THE BALANCE OF THE STOCK IS LYING, WHICH EXPLAINS THE DISCREPANCY OF THE STOCK AS PER INVENTORY MADE DURING SURVEY AND AS PER THE STOCK REGISTER. ANOTHER STATEMENT OF MS. RITAKSHI ARORA, THE DIRECTOR OF THE APPELLANT COMPANY WAS ALSO RECORDE D ON 05.12.07 WHEREIN IN ANSWER TO QUESTION NO 5 SHE HAS CLEARLY STATED THAT THEY HAVE ALSO A BRANCH AT GURGAON SF - 18 - 20, MGF MEGA CITY MALL, MG ROAD, GURGAON WHICH IS HAVING APPROXIMATE AREA OF 400 SQ. FT AND RS. 20 LACS HAS BEEN SPENT ON RENOVATION AND D ECORATION OF THE SAME AND A RENT OF RS. 5.85 LACS PER MONTH IS BEING PAID TO DEEP SHIKHA JAIN AND OTHERS BY CHEQUE. SECURITY OF THREE MONTHS' RENT IN ADVANCE HAS BEEN PAID FOR GURGAON OFFICE AND SIX MONTHS ADVANCE RENT FOR ADVANCE RENT HAD BEEN PAID FOR TH IS PREMISE AT NEW DELHI. DUE TDS HAS BEEN DEDUCTED AS PER ACT. IN VIEW OF THE ABOVE STATEMENTS RECORDED AT TIME OF SEARCH ITSELF IT IS CLEAR THAT THE APPELLANT DID HAVE ANOTHER PREMISES WHERE THE BALANCE OF THE STOCK WAS STATED TO HAVE BEEN STOCKED AND WHI CH WAS NOT COVERED EITHER UNDER SECTION 132 OR UNDER SECTION 133A AND THEREFORE ANY ASSUMPTION THAT THE SHORT STOCK FOR RS. 1.21 CRORES HAS BEEN SOLD OUT OF BOOKS IS WITHOUT ANY BASIS. THE ADDITION MADE FOR RS. 68 LACS UPON APPLYING GP RATE OF 55.82% ON TH IS ALLEGED SHORT STOCK IS THEREFORE DIRECTED TO BE DELETED. IN A RESULT THE APPEAL IS PARTLY ALLOWED. 12. WE HAVE ALSO CAREFULLY PERUSED THE STATEMENT OF SHRI GHOSH WHO IS AN ACCOUNTANT WITH THE ASSESSEE, WHO EMPHATICALLY STATED THAT THE ABOVE STOCK WAS LYIN G AT GURGAON STORE. IN VIEW OF THIS THERE CANNOT BE ANY DIFFERENCE IN THE STOCK FOUND AND RECORDED IN THE BOOKS. HOWEVER, AS THE STOCK LYING AT THE GURGAON STORE COULD NOT BE EXAMINED BY THE LD ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. IN THE INTEREST OF JUSTICE IT IS REQUIRED TO SET ASIDE THIS GROUND TO THE FILE OF THE LD ASSESSING OFFICER TO EXAMINE THE AVAILABILITY OF STOCK AS PER THE STATEMENT OF THE ACCOUNTANT AND IF IT IS FOUND THAT SAME WAS AVAILABLE WITH THE ASSESSEE AT THE TIME OF SURVEY THE ADDITION IS REQUIRED TO BE DELETED. ACCORDINGLY, WE DISPOSE OFF THIS GROUND OF APPEAL BY RESTORING THE MATTER BACK TO THE FILE OF LD AO WITH A LIMITED DIRECTION TO EXAMINE AVAILABILITY OF PAGE 6 OF 6 RS. 12186818/ - WITH THE ASSESSEE AT GURGAON STORE OR NOT AND IF THE CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT THEN HE IS FURTHER DIRECTED DELETE THE ABOVE ADDITION. OTHERWISE, THE ADDITION MAY BE RESTRICTED TO THE DISCLOSED RATE OF GROSS PROFIT OF THE ASSESSEE. IN THE RESULT GROUND NO. 2 OF THE APPE AL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. 13. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 / 04 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 8 / 04 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI