ITO, Malerkotla V. Sh. Rajiv Kumar, Ahmedgarh.

ITA 5/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60880 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-06-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: ARUN GUPTA
• Section: 143(3)

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.5/CHD/2012 (ASSESSMENT YEAR : 2008-09) THE INCOME OFFICER, VS. SH.RAJIV KUMAR, WARD IV(4), PROP. M/S GOYAL & CO., MALERKOTLA. NEAR JANTA COLLEGE, CINEMA ROAD, AHMEDGARH. PAN: ACJPK6964A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA, DR RESPONDENT BY : S/SHRI ARUN GUPTA & PANKAJ PERIMAL DATE OF HEARING : 06.06.2012 DATE OF PRONOUNCEMENT : 22.06.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL WAS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA D ATED 24.10.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE PRESENT APPEAL FILED BY THE REVENUE IS FURNI SHED BELATEDLY AFTER A DELAY OF FOUR DAYS. THE LEARNED D.R. FOR T HE REVENUE POINTED OUT THAT THE DELAY IN THE PRESENT APPEAL WAS ON ACCOUNT OF POSTAL DELAY, THOUGH THE APPEAL PAPERS WERE POSTED IN TIME. IN V IEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE CONDONE THE DELAY OF FO UR DAYS AND PROCEED TO DECIDE THE PRESENT APPEAL. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE DELETION OF ADDITION OF RS.19,10,716/- MADE ON ACCOUNT OF LO W GP RATE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DERIVES INCOME FROM MANUFACTURING AND SALE OF CATTLE FEED. THE GR OSS TURNOVER OF THE 2 ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS RS.3. 56 CRORES WHICH INCLUDED SALE OF SELF MANUFACTURED CATTLE FEED VALU ED AT RS.3.31 CRORES. THE ASSESSEE IN THE MANUFACTURING ACCOUNT HAD REFLE CTED ONLY COST OF RAW MATERIAL CONSUMED IN THE PRODUCE OF CATTLE FEED AND SALE THEREOF IN TERMS OF QUANTITY AND THEIR VALUE. THE ASSESSEE HAD DECL ARED GROSS PROFIT RATE OF 9.8% IN THIS REGARD. THE ASSESSING OFFICER, HOW EVER, NOTED THAT THE MANUFACTURING EXPENSES TOTALING RS.25,31,245/- WERE DEBITED TO THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER VIDE PARA 3 OBSERVED THAT SINCE THE SAID EXPENSES WERE INCIDENTAL AND DIRECTL Y PERTAIN TO THE PRODUCTION OF CATTLE FEED, THE SAME ARE TO BE ADJUS TED IN THE MANUFACTURING ACCOUNT. AFTER THE SAID ADJUSTMENT T HE GROSS PROFIT RATE WAS AROUND 2%. THE ASSESSING OFFICER ALSO NOTED TH E ASSESSEE WAS CONSISTENTLY DECLARING THE GROSS PROFIT RATE AT ARO UND 2% FROM YEAR AFTER YEAR AND HENCE THE SAME COULD NOT BE ACCEPTED AS GE NUINE. THE SECOND ASPECT NOTED BY THE ASSESSING OFFICER WAS THAT MAJO RITY OF THE TURNOVER COMPRISES OF CASH SALE ONLY. THE NEXT ISSUE RAISED BY THE ASSESSING OFFICER WAS VALUATION OF CLOSING STOCK WHICH AS PER THE ASSESSING OFFICER WAS NOT AT GROSS PRICE. IN VIEW THEREOF, S HOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE WHEREIN THE ASSESSEE WAS ASK ED TO EXPLAIN WHY GP RATE OF 12% BE NOT APPLIED AS AGAINST GP RATE OF 9. 80 DISCLOSED BY HIM. THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFIC ER IS INCORPORATED UNDER PARA 6 OF THE ASSESSMENT ORDER. REPLY OF THE ASSESSEE TO THE SHOW CAUSE NOTICE WAS THAT IT WAS MANUFACTURING DIFFEREN T QUALITIES OF CATTLE FEED AND THE SAME COULD NOT BE COMPARED WITH THE AV ERAGE SALE RATE. THE ASSESSING OFFICER NOTED THAT QUANTITY, RATE AND THE VALUE OF CATTLE FEED SOLD BY THE ASSESSEE HAD BEEN MENTIONED IN THE CASH INVOICE BUT THERE WAS NO REFERENCE TO ANY PARTICULAR TYPE OR VARIETY OF THE CATTLE FEED SOLD. THE ASSESSING OFFICER REJECTED THE CASH BILLS ISSUE D FOR SALE OF CATTLE FEED NOT BEING IN THE NORMAL COURSE OF BUSINESS. T HE ASSESSING OFFICER 3 IN PARA 12 OF THE ASSESSMENT ORDER OBSERVED THAT TH E ASSESSEE HAD DECLARED GP RATE OF 2.01% ON SALES OF RS.3.56 CRORE S WHICH WAS UNREASONABLY LOW AS AGAINST THE RESULTS SHOWN BY TH E SISTER CONCERN OF THE ASSESSEE WHEREIN THE GP RATE OF 5.19% WAS ADOPT ED. THE ASSESSING OFFICER ACCORDINGLY APPLIED GP RATE OF 7% ON ENHANC ED SALE OF RS.3.75 CRORES AND MADE AN ADDITION OF RS.19,10,716/-. 5. THE CIT (APPEALS) HAS GIVEN A FINDING THAT THE A SSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT WITH QUANTITAT IVE STOCK DETAILS AND THE VALUATION THEREOF. THE CIT (APPEALS) FURTHER O BSERVED THAT THE ASSESSING OFFICER HAD NOT FOUND ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT AND FURTHER IT WAS ALSO NOT THE CASE WHERE THE ASSESSEE HAD FAILED TO FILE EVIDENCE IN RESPECT OF MATERIAL PURC HASED AND FOR CERTAIN EXPENSES. THE CIT (APPEALS) CONCLUDED BY HOLDING T HAT THE ASSESSING OFFICER HAD DOUBTED THE CASH SALES WITHOUT ANY VALI D BASIS OR ANY COMPARABLE EVIDENCE AND IN THE ABSENCE OF ANY EVIDE NCE BEING BROUGHT ON RECORD TO PROVE THAT ANY SALES WERE MADE OUTSIDE THE BOOKS OF ACCOUNT AND GP RATE FURNISHED BY THE ASSESSEE BEING PROGRES SIVE, THERE WAS NO MERIT IN THE PRESENT ADDITION MADE BY THE ASSESSING OFFICER, WHICH WAS DELETED. 6. S/SHRI ARUN GUPTA & PANKAJ PERIMAL APPEARED FOR THE ASSESSEE AND SHRI AKHILESH GUPTA PUT IN APPEARANCE ON BEHALF OF THE REVENUE AND PUT FORWARD THEIR CONTENTIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS CARRYING ON THE BUSINESS OF MANUFACTURI NG AND SALE OF CATTLE FEED. THE GROSS TURNOVER OF THE ASSESSEE FOR THE Y EAR UNDER CONSIDERATION WAS RS.3.56 CRORES. MAJORITY OF THE SALES MADE BY THE ASSESSEE WERE IN CASH. THE ASSESSEE HAD MAINTAINED COMPLETE BOOKS OF ACCOUNT WHICH WERE PRODUCED BEFORE THE ASSESSING OF FICER AND IT IS NOT 4 THE CASE OF THE ASSESSING OFFICER THAT INCOMPLETE B OOKS OF ACCOUNT HAD BEEN PRODUCED. FURTHER FROM THE PERUSAL OF THE TRA DING ACCOUNT FILED BY THE ASSESSEE IT TRANSPIRES THAT THE ASSESSEE HAD DE CLARED THE VALUE OF OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK I TEM-WISE BOTH IN QUANTITY AND VALUE. THE SAID DECLARATION WAS BEING MADE BY THE ASSESSEE FROM YEAR TO YEAR UNDER WHICH IT WAS DECLARING BOTH THE QUANTITY-WISE AND VALUE-WISE RESULTS OF THE VARIOUS ITEMS MANUFAC TURED AND SOLD BY THE ASSESSEE. THE ASSESSEE CLAIMED TO HAVE MAINTAINED QUANTITATIVE DETAILS OF THE ITEMS DEALT IN BY HIM. THE ASSESSING OFFICE R HAS NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE AS SESSEE. THE MAIN OBJECTION OF THE ASSESSING OFFICER WAS THE DEBITING OF CERTAIN EXPENSES RELATING TO THE MANUFACTURING ACTIVITIES IN THE PRO FIT & LOSS ACCOUNT AND NOT IN THE TRADING ACCOUNT. HOWEVER, IN CASE THE T RADING ACCOUNT RELATING TO ASSESSMENT YEAR UNDER CONSIDERATION AND THE EARL IER YEAR IS RECAST, GP RATE DECLARED IN ASSESSMENT YEARS 2006-07 TO 2008-0 9 WAS VARYING IN THE RANGE OF 2.59% IN ASSESSMENT YEAR 2006-07, 2.32% IN ASSESSMENT YEAR 2007-08 AND 2.97% IN ASSESSMENT YEAR 2008-09. THE YEAR OF APPEAL IS 2008-09 AND GP RATE DECLARED EVEN BY DEBITING THE E XPENDITURE TO THE TRADING ACCOUNT IS ON THE HIGHER SIDE AS COMPARED T O THE EARLIER YEAR. FURTHER THOUGH THE ASSESSEE HAS MADE MAJORITY OF IT S SALES IN CASH BUT NO DEFECT HAS BEEN FOUND IN THE SAID CASH SALES REFLEC TED BY THE ASSESSEE NOR ANY EVIDENCE OF ANY CASH SALES MADE OUTSIDE THE BOO KS OF ACCOUNT HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER. T HE ASSESSEE HAVING MAINTAINED COMPLETE DETAILS OF ITS TRADING IN CATTL E FEED AND PRODUCING THE SAME BEFORE THE ASSESSING OFFICER, WE FIND NO M ERIT IN THE ORDER OF THE ASSESSING OFFICER IN REJECTING THE SAID BOOKS O F ACCOUNT ON MERE SURMISES AND CONJECTURES. FURTHER THE FINDINGS OF THE CIT (APPEALS) HAVE NOT BEEN CONTROVERTED BY THE LEARNED D.R. FOR THE REVENUE AND IN THE ABSENCE OF THE SAME WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN 5 ACCEPTING THE TRADING RESULTS SHOWN BY THE ASSESSEE . FURTHER WE FIND NO MERIT IN ADOPTION OF GP RATE BY THE ASSESSING OFFIC ER BY APPLYING GP RATE DECLARED BY OTHER CONCERN, SPECIALLY IN THE CI RCUMSTANCES WHERE NO DEFECTS HAVE BEEN FOUND IN THE BOOKS OF ACCOUNT MAI NTAINED BY THE ASSESSEE. UPHOLDING THE ORDER OF THE CIT (APPEALS) WE DISMISS GROUND NO.1 RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF JUNE, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND JUNE, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH