Dinesh Grover, Ambala City V. JCIT, Ambala

ITA 491/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64032 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Rejection of books of accounts; Depreciation; Income from undisclosed sources
• Section: 145; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 491/CHD/2012 ASSESSMENT YEAR: 2008-09 M/S DINESH GROVER, V JCIT, PROP. M/S DINESH BROTHER, AMBALA RANGE, WHOLESALE TEXTILE MARKET, AMBALA. AMBALA CITY. PAN: ACWPG-1244L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI J.S.NAGAR DATE OF HEARING : 22.11.2012 DATE OF PRONOUNCEMENT : 27.11.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 06.02.2012, PASSED BY THE L D. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF LD. AO TO REJECT OUR BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE TRADING ADDITION OF RS.4,00,000/- MADE BY THE LD. AO. 3. THE LD. CIT(APPEALS) HAS ERRED IN LAW & FACTS IN CO NFIRMING FOLLOWING DISALLOWANCES :- A) 1/5 TH DISALLOWANCE MADE BY THE LD. AO IN VEHICLE RUNNING EXP. AND CAR DEPRECIATION EXP. AND CAR INTEREST ETC. B) 1/5 TH DISALLOWANCE IN FESTIVAL EXPENSES A/C 2 C) RS.25000/- UNDER BUSINESS PROMOTION EXP. A/C. 4. THAT THE APPELLANT CRAVES FOR PERMISSION TO ADD, DE LETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. FIRST TWO GROUNDS OF APPEAL, RAISED BY THE APPEL LANT, ARE INTER-CONNECTED AND PERTAIN TO REJECTION OF BOOKS O F ACCOUNT AND CONSEQUENT TRADING ADDITION MADE BY THE AO FOR RS.4,00,000/-, VIDE ASSTT. ORDER DATED 23.12.2010, PASSED U/S 143(3) OF THE ACT. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS B EFORE THE BENCH, LD. 'AR' REFERRED TO PARA 3 OF THE ASSESSMEN T ORDER AND HIGHLIGHTED THAT THE GP RATE IS STEADILY INCREASING FROM ASSESSMENT YEAR 2006-07 TO 2008-09, AS RECORDED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER. LD. 'AR' CONTEN DED THAT BOOKS OF ACCOUNT HAVE BEEN REJECTED MERELY ON THE G ROUND OF NON-MAINTENANCE OF STOCK REGISTER AND THE SAME IS N OT IN CONSONANCE WITH THE RATIO OF THE CASE IN PANDIT BRO S. V CIT (1954) 26 ITR 159 (P&H). AO MADE ADDITION OF RS.4, 00,000/- MERELY ON SURMISES AND CONJECTURES AND WITHOUT ANY BASIS. 5. LD. 'DR', ON THE OTHER HAND, SUPPORTED THE FINDI NGS OF THE CIT(APPEALS) AND STATED THAT THE ADDITION HAS B EEN MADE ON ACCOUNT OF TRADING ADDITIONS. 6. WE HAVE PERUSED AND CONSIDERED THE RIVAL SUBMISS IONS, FACTS OF THE CASE AND THE RELEVANT RECORDS. THE AS SESSEE IS WHOLESALE DEALER OF DRESS-MATERIAL AS WELL AS READY MADE SUITES AND UNSTITCHED SUITES FOR LADIES. AO, OBSER VED THAT IN SUCH A WHOLESALE BUSINESS, IT IS VERY MUCH POSSIBLE TO MAINTAIN STOCK REGISTER. THE AO, FURTHER, MENTIONE D IN PARA 3 3 OF THE IMPUGNED ASSESSMENT ORDER THAT ASSESSEE DURI NG THE A.Y. 2007-08, IN VIEW OF A SURVEY U/S 133A OF THE ACT, ON THE PREMISES OF THE ASSESSEE, DECLARED ADDITIONAL INCOM E OF RS.80,00,000/-, DUE TO DISCREPANCIES ON ACCOUNT OF STOCK AND CASH. 7. THE FINDINGS OF THE CIT(APPEALS) ON THE ISSUE OF TRADING ADDITIONS, ARE REPRODUCED HEREUNDER : 4. I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MAD E BY THE AR. THE ASSESSEE IS ENGAGED IN THE WHOLE SALE CLO TH BUSINESS, NOT RETAIL BUSINESS, AND THEREFORE IT IS NOT DIFFICULT TO MAINTAIN THE STOCK REGISTER. NO CASE HAS BEEN MADE OUT BY THE APPELLANT THAT IT IS NOT PRACTICALLY POSSIBLE TO MAINTAIN THE STOC K REGISTER. THE CONDUCT OF THE ASSESSEE IS EVIDENT FROM THE FACT TH AT HE HAS DECLARED UNACCOUNTED INCOME OF RS.80.00 LACS ON ACC OUNT OF EXCESS STOCK AND CASH FOUND DURING THE SURV EY OPERATIONS U/S 133A IN THE IMMEDIATELY PRECEDING YEAR I.E. A Y 2007-08. NON MAINTENANCE OF STOCK REGISTER COUPLED WITH THE FACT OF UNVERIFIABLE NATURE OF MOST OF THE PAYMENTS MADE IN CASH MAKE SU FFICIENT GROUND FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145 (3) OF T HE ACT. THE CASE LAWS RELIED UPON BY THE AR ARE DISTINGUISHABLE ON F ACTS. REGARDING THE ESTIMATION OF GP, THOUGH IT IS A FACT THAT THE ASSESSEE HAS BEEN REGULARLY DECLARING HIGHER GP INSPITE OF I NCREASE IN SALES, THE FACT OF DISCOVERY OF UNACCOUNTED STOCK A ND CASH DURING THE SURVEY IN THE PRECEDING YEAR, CANNOT BE LOST SI GHT OFF. HAVING REGARD TO THE FACTS OF THE CASE, I AM OF THE OPINIO N THAT ADOPTION OF GP RATE OF 6.53% BY THE AO IS FAIR AND REASONABLE. IN VIEW OF THE ABOVE, THE ACTION OF THE AO IS UPHELD AND THE GROUNDS OF A PPEAL ARE DISMISSED. 8. THE AO, AFTER REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, MADE AN ADDITION OF RS.4,00,000/-, BY SUBS TITUTING THE BOOK VERSION OF DECLARED AT 6.11% BY G.P. ESTIM ATED AT 6.53%. THE AO, ALSO OBSERVED IN PARA 3 OF THE IMPU GNED 4 ASSESSMENT ORDER THAT CERTAIN EXPENSES WERE NOT VER IFIABLE. THE BOOKS OF ACCOUNT WERE REJECTED ON CUMULATIVE EF FECT OF OBSERVATIONS MADE BY THE AO, ON THE ISSUE OF NON- MAINTENANCE OF STOCK REGISTER AND NON-VERIFICATION OF SUCH EXPENSES. LD. 'AR', REFERRED TO THE DECISION OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF PANDIT BRO S. V CIT (1954) 26 ITR 159, TO SUPPORT HIS CONTENTIONS AGAIN ST REJECTION OF BOOKS OF ACCOUNT. HOWEVER, THE BOOKS OF ACCOUNT AS REJECTED BY THE AO ARE UPHELD, IN VIEW OF OTHER DEFECTS POINTED OUT BY THE AO, PERTAINING TO NON-VERIFIABIL ITY OF CERTAIN EXPENSES. 9. THE AO, MADE AN ADDITION OF RS.4,00,000/-, WITHO UT SPECIFYING ANY FOUNDATION FOR MAKING SUCH ADDITIONS . THE IMPUGNED ADDITION IS MADE PURELY ON ADHOC BASIS, AS IS EVIDENT FROM THE PERUSAL OF THE IMPUGNED PARA 3 OF THE ASSESSMENT ORDER. IT IS RECORDED BY THE AO, IN THE IMPUGNED ASSTT. ORDER (PARA 3) THAT NET PROFIT IS ESTIMATED AT 6.53% RESULTING AN ESTIMATED TRADING ADDITION OF RS.4,00, 000/-. AN ADDITION OF RS.4,00,000/- IS MADE TO THE RETURNE D INCOME ON ACCOUNT OF TRADE LEAKAGE. THE AO, PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF S.N.NAMASIVAYAM CHETTIAR V CIT 38 ITR 579 ( S.C), WHEREIN IMPORTANCE OF MAINTENANCE OF STOCK REGISTER , FOR ARRIVING AT TRUE PROFIT HAS BEEN HIGHLIGHTED. THE REJECTION OF BOOKS OF ACCOUNT, AS CONCEIVED BY THE AO IS SUPPORT ED BY THIS DECISION. THE AO, FURTHER, PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN KACHWALA GEMS V JCIT 2 88 ITR 10 (S.C). THE HON'BLE SUPREME COURT LAID DOWN CLEA R LEGAL 5 PROPOSITION THAT TRADING ADDITION, ON ACCOUNT OF GP CAN BE MADE, ON THE BASIS OF COMPARABLE CASES, THOUGH, THE RE CAN BE AN ELEMENT OF GUESS, IN MAKING SUCH ESTIMATION. THE AO HAS NOT MADE THE ADDITION ON ANY BASIS, WHAT-SO-EVER, A ND NO COMPARABLE CASE HAS BEEN CITED BY THE AO IN THE IMP UGNED ORDER. FURTHER, PAST HISTORY OF THE CASE RUNS CONTRARY TO THE ADDITION MADE BY THE AO, AS THE GP SHOWN BY THE ASS ESSEE IS ON THE HIGHER SIDE VIS--VIS GP SHOWN IN THE IMMEDI ATELY PRECEDING ASSESSMENT YEAR. THIS FACTUM IS ACKNOWLED GED BY THE AO, HIMSELF, IN PARA 3 OF THE SAID ASSESSMENT O RDER. THE AO, FURTHER, PLACED RELIANCE ON THE DECISION, REPOR TED IN 272 ITR 580 [HARCHARANDASS TEXTILE MILLS V CIT (P&H) ] . IN THIS CASE, THE HON'BLE HIGH COURT HAS HELD THAT TRADING ADDITION, ON ACCOUNT OF ESTIMATION IS QUESTION OF FACT. 10. THERE ARE PLETHORA OF JUDICIAL VERDICTS, CLEARL Y HIGHLIGHTING THAT NO ADDITION CAN BE MADE, ON ESTI MATE BASIS, WITHOUT THERE BEING ANY FOUNDATION OF RELEVANT MATE RIAL OR EVIDENCE, FOR MAKING SUCH ESTIMATION. THE AO, MADE THE IMPUGNED ADDITION ARBITRARILY AND WITHOUT BRINGING ANY MATERIAL ON RECORD. HOWEVER, SINCE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, WERE SUFFERING FROM VAR IOUS DEFECTS, AS POINTED OUT BY THE AO, ADDITION IS REST RICTED TO RS. 1 LAKH, TO MEET THE ENDS OF JUSTICE AND, HENCE, THI S GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE BY THE AO AND UPHELD BY THE CIT(APPEA LS), ON THE GROUND OF PURE ADHOC ADDITION, WITHOUT THERE BE ING ANY 6 MATERIAL ON RECORD. THESE GROUNDS OF APPEAL ARE MA RKED AS A 1/5 TH DISALLOWANCE MADE IN RUNNING VEHICLE EXPENDITURE AND CAR DEPRECIATION EXPENSES. THE AO, DISALLOWED 1/5 TH OF SUCH EXPENSES ON THE GROUND OF PERSONAL USER OF THE VEHICLE. CONSEQUENTLY, ADDITION OF RS.99,422/- WAS DISALLOWE D BY THE AO. SIMILARLY, THE AO DISALLOWED RS.55,253/- IN RE SPECT OF CAR DEPRECIATION, CAR INSURANCE AND CAR INTEREST. L D. CIT(APPEALS), UPHELD THE FINDINGS OF THE AO. 11(I) A BARE PERUSAL OF THE FINDINGS OF THE LOWE R AUTHORITIES REVEALS THAT NO RELEVANT AND CORROBORATIVE MATERIAL HAS BEEN BROUGHT, ON RECORD, TO JUSTIFY THE SAID ADDITION, O N ESTIMATE BASIS. HOWEVER, WITH A VIEW TO MEET THE ENDS OF JUS TICE, THE IMPUGNED ADDITIONS ARE REDUCED TO 1/10 TH OF SUCH EXPENSES. ACCORDINGLY, GROUND OF APPEAL NO. 3(A) IS PARTLY AL LOWED. 11(II) THE ASSESSEE HAS RAISED ANOTHER GROUND, MARKED AS 3(B) AS, 1/5 TH DISALLOWANCE OF FESTIVAL EXPENSES NOT JUSTIFIED, THERE BEING NO RELEVANT MATERIAL ON RECORD. THE AO, DISALLOWED SUCH EXPENSES ON THE GROUND THAT THE SAM E ARE EXCESSIVE AND FOR WANT OF VOUCHERS. LD. CIT(APPEAL S), UPHELD THE FINDINGS OF THE AO. HOWEVER, THE AO HAS FAILED TO SPECIFY THE ITEMS OF SUCH EXPENSES, NOT COVERED BY VOUCHERS AND THE BASIS FOR EXCESSIVENESS OF THE SAME. IN VIEW OF TH IS, AS ALSO TO MEET THE END OF JUSTICE, 1/10 TH OF SUCH EXPENSES ARE UPHELD. ACCORDINGLY, GROUND NO. 3(B) RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 12. THE ASSESSEE HAS RAISED GROUND NO. 3(C) THAT DISALLOWANCE OF RS.25,000/- UNDER BUSINESS PROMOTI ON 7 EXPENSES IS NOT JUSTIFIED. THE ADDITION HAS BEEN MADE FOR WANT OF VOUCHERS. SUCH FINDINGS OF THE AO WERE UPH ELD BY CIT(APPEALS). 13. HAVING REGARD TO THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY GROUN D TO INTERFERE WITH THE FINDINGS OF THE CIT(APPEALS) AND THE SAME ARE UPHELD. GROUND NO. 3(C), RAISED BY THE ASSESSEE IS DISMISSED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOV.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH NOV.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH.