DCIT, AMRAVATI CIRCLE, Amaravati V. SHRI PARMANAND RAMAVATAR AGRAWAL, Amaravati

ITA 53/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1731 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K LUKKA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 53/NAG./2014 ( ASSESSMENT YEAR : 2008-09 ) DY. COMMISSIONER OF INCOME TAX AMRAVATI CIRCLE, AAYAKAR BHAWAN AMBA PETH, AMRAVATI 444 601 APPELLANT V/S SHRI PERMANAND RAMAVATAR AGRAWAL PROPRIETOR: SINGHANIYA TRADING COMPANY LADDHA COMPLEX, BACCHARAJ PLOT AMRAVATI PAN AAQPA7025M .... RESPONDENT ASSESSEE BY : SHRI MANOJ MORYANI REVENUE BY : SHRI V.K. LUKKA DATE OF HEARING 30.07.2015 DATE OF ORDER 21.08.20 15 O R D E R PER SHAMIM YAHYA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 12 TH NOVEMBER 2013, PASSED BY THE LEARNED COMMISSIONER (APPEALS)-II, NAGPUR, FOR THE ASSESSMENT YEAR 200809, O N THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 28,32,773, MADE BY THE ASSESSING OFFICER TO THE RETURN OF INCOME ON ACCOUNT SHRI PERMANAND RAMAVATAR AGRAWAL 2 OF ESTIMATED EXCESS SHORTAGES CLAIMED BY THE ASSESSEE IN PURCHASE OF SOYABEAN, OIL CAKE AND TOOR. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE DISREGARDING THE FACT THAT THE SAID ADDITION WAS MADE ON TH E BASIS OF THE SHORTAGES CLAIMED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E., A.Y. 200708 AND ANOTHER COMPARABLE CASE. 2. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF ` 33,75,710, WAS FILED ON 1 ST OCTOBER 2009. THE APPELLANT IS ENGAGED IN THE BUSIN ESS OF TRADING IN FOOD GRAINS, PULSES AND COTTON. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE BOOKS OF ACCOUNT WERE MAINTAINED AND AUDITED UNDER S ECTION 44AB OF THE ACT, AND THE BOOKS OF ACCOUNT WERE PRODUCED AND V ERIFIED BY HIM ON TEST CHECK BASIS. IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT THE APPELLANT HAD SHOWN CERTAIN SHORTAGES IN RESPECT OF VARIOUS ITEMS IN WHICH IT HAD TRADED AND IN RESPECT OF CERTAIN ITEMS THE CLAIM OF SHORTAGE WAS COMPARATIVELY HIGHER DURING THE YEAR VISAVIS THE IMMEDIATELY PRECEDING YEAR. 3. IT WAS EXPLAINED BY THE ASSESSEE THAT THE SAID SHOR TAGE IS MERELY ON ACCOUNT OF DRYING OF MOISTURE IN THE AGRICULTURAL PRODUCE LIKE SOYABEAN, TOOR, ETC. IF THE COMMODITIES ARE PURCHASED I N THE PERIOD IMMEDIATELY AFTER HARVESTING THEN SHORTAGE IS ON HIG HER SIDE AS WITH THE PASSAGE OF TIME THE MOISTURE DRIES AWAY IS SUN HEAD. IT WAS ALSO EXPLAINED THAT IN THE APPELLANTS CASE 90% OF THE PUR CHASE HAVE BEEN SHRI PERMANAND RAMAVATAR AGRAWAL 3 EFFECTED IN THE MONTH OF OCTOBER, NOVEMBER AND DECEMBER WHEN THE FRESH AGRICULTURAL PRODUCE ARE BROUGHT IN THE MARKET AFTER HARVESTING THE SAME FROM THE LAND. IT WAS ALSO EXPLAINED THAT THE SHORTAGES ARE DUE TO TRANSPORTATI8ON IN WAGONS AND THAT IN TRANSI T LOT OF DAMAGES OCCUR TO THE GOODS AND SOME TIME THE BAGS AE BROKEN WHICH RESULT IN WEIGHT OF GOODS AFTER REACHING THE DESTINATION BEING SIGNIFICANTLY LESS THAN THE WEIGHT OF GOODS LOADED AT THE TIME OF BOOKIN G. SPECIFIC INSTANCES OF SUCH LOSSES DURING THE TRANSIT WERE ALS O SUBMITTED. IT WAS ALSO EXPLAINED THAT SHORTAGES ARE ALSO ON HIGHER SI DE ON ACCOUNT OF CONTENT OF EARTH IN THE GOODS PURCHASED, WHICH HAS TO BE SUBSEQUENTLY REMOVED. IN CONCLUSION, THE APPELLANT HAS ALSO STAT ED THAT ALL SUPPORTING DOCUMENTS AND EVIDENCES WERE SUBMITTED TO JUSTIFY THE SHORT AGES. 4. THE ASSESSING OFFICER, HOWEVER, CAME TO THE CONCLUSION T HAT SHORTAGE SHOWN BY THE APPELLANT IS HIGHER AS COMPAR ED TO LAST YEAR IN CERTAIN ITEMS AND ALSO IN COMPARISON WITH ANOTHER C ONCERN BY NAME M/S. JAI AMBE TRADERS, WHICH HAD SHOWN LOWER SHORTAG E IN SOYABEAN AND TOOR DURING THE YEAR UNDER CONSIDERATION. THE AS SESSING OFFICER, THEREFORE, INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE SHOR TAGE IN RESPECT OF SOYABEAN, OIL CAKE AND TOOR AT 1% WHICH RESULTED IN ADDITION OF ` 28,32,773, TO THE TOTAL INCOME OF THE ASSESSEE. SHRI PERMANAND RAMAVATAR AGRAWAL 4 5. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) NOTED THAT THE ONLY BASIS FOR THE ASSESSING OFFICER TO REJECT TO BOOKS OF ACCOUNT WAS THE HIGHER S HORTAGE CLAIMED IN RESPECT OF CERTAIN ITEMS IN COMPARISON TO THE IMMEDI ATELY PRECEDING YEAR AND IN COMPARISON TO M/S. JAI AMBE TRADERS. THE L EARNED CIT(A) REFERRED TO THE FOLLOWING CHART OF COMPARATIVE FIGURES: SR. NO. PRODUCE SHORTAGE SHOWN BY THE ASSESSEE (A.Y. 200708) SHORTAGE SHOWN BY THE ASSESSEE (A.Y. 200809) 1. CHANA 1.04% 0.95% 2. MOONG 3.97% 1.86% 3. OIL CAKE 0.43% 1.64% 4. SOYABEAN 1.04% 1.96% 5. TOOR 1.16% 2.66% 6. THE LEARNED CIT(A) OBSERVED THAT THE SHORTAGE RESULTS FROM FUNCTIONING OF VARIOUS PARAMETERS AND IS BOUND TO VA RY FROM YEARTO YEAR. THE LEARNED CIT(A) ALSO NOTED THAT, AS EVIDENT FRO M THE ABOVE, IN CERTAIN ITEMS, AS IS EVIDENT FROM THE ABOVE, THERE IS SUBSTANTIAL DECREES IN THE SHORTAGE CLAIMED. THE LEARNED CIT(A) ALSO GAVE A FINDING THAT HE HAS EXAMINED THE PURCHASE AND SALE REGISTER OF THE A SSESSEE AND REPRODUCED MONTHWISE PURCHASE AND SALE FOR THE ASSE SSMENT YEAR 200708 AND 200809 IN HIS APPELLATE ORDER. THE LEAR NED CIT(A), FURTHER HELD AS UNDER: SHRI PERMANAND RAMAVATAR AGRAWAL 5 5.3 IT CAN BE SEEN FROM THE ABOVE TABLES THAT THERE ARE SIGNIFICANT VARIATIONS IN THE PATTERN IN WHICH THE TRADING HA S BEEN CONDUCTED BY THE APPELLANT IN THE TWO YEARS. IN RESPECT OF OIL CAKE, ALMOST 90% OF THE PURCHASE IN A.Y. 200708 HAS BEEN MADE IN THE MONTH OF DECEMBER 2006 WHILE THE PURCHASE ARE FAIRLY SPREAD OUT THROUGH NOVEMBER, DECEMBER AND JANUARY 2007 IN A.Y. 200809. ALSO THE SALES HAVE BEEN MADE ONLY IN THE MONTH OF JUNE 2006 IN A.Y. 200708 WHILE SALES ARE SPREAD OUT OVER SEVERAL MONTHS IN A.Y. 200809. ALSO, IN SOYABEAN, IN A.Y. 200708, ALMOST THE ENTIRE PURCHASE HAS BEEN MADE IN THE M ONTH OF NOVEMBER WHILE IN A.Y. 200809 THERE IS UNIFORM SPREAD OF PURCHASE OVER SEVERAL MONTHS. THERE ARE SIMILAR VARIATION IN RESPECT OF TOOR ALSO WHICH CLEARLY ESTABLISHES THAT THE PAT TERN OF BUSINESS IS DIFFERENT FOR A.Y. 200809 AS COMPARED TO A.Y . 2007 08 AND CONSEQUENTLY THE SHORTAGES THAT WOULD HAVE ARISE WOULD BE DIFFERENT IN EACH YEAR FOR EACH ITEM. 5.4 ALSO. THE LD.AOS USE OF SHORTAGE FIGURES OF M/S. JAI AMBE TRADERS, WITHOUT GIVING AN OPPORTUNITY TO APPELLANT TO EXAMINE THE FACTS AND FIGURES OF THE FIRM ALSO WEAKENS THE CASE OF T HE LD.AO. COMPLETE DETAILS REGARDING THE BUSINESS PATTERN OF M/S. JAI AMBE TRADERS INCLUDING THEIR TRADING, PROFIT & LOSS ACCOUNT, DETAILS OF PURCHASE AND SALE, PERIODS OF SHORTAGE, ETC., WOU LD HAVE TO BE PROVIDED TO THE APPELLANT BEFORE ANY SUCH EVIDENCE CAN BE PUT TO USE AGAINST THE APPELLANT. 5.5 IT IS ALSO A FACT THAT THE GP PERCENTAGE AND NP PERC ENTAGE ARE SIGNIFICANTLY HIGHER THAN THE IMMEDIATELY PRECEDING YEAR. IT IS NOT DISPUTED THAT THE TURNOVER, GP RATE AND NP RATE DECLARED B Y THE APPELLANT DURING THE YEAR UNDER CONSIDERATION ARE HIGHER AS COMPARED TO THE PRECEDING YEAR AND IT IS ALSO A FACT THAT I N THE EARLIER ASSESSMENT YEAR BOOK RESULTS OF THE APPELLANT HAS BEE N ACCEPTED AS TRUE AND CORRECT. IT IS ALSO NOT DISPUTED THA T THE BOOKS OF ACCOUNT ARE DULY SUPPORTED BY PURCHASE VOUCHERS, VOUCHERS FOR EXPENSE AND STOCK RECORDS. IN THE ABSENCE OF ANY SPECIFIC INSTANCES OF MISTAKES IN THE BOOKS OF ACCOUNT AND OTHER RECORDS, THE BOOKS RESULT CANNOT BE REJECTED. THUS, REJECTION OF BOOKS OF ACCOUNT IS WITHOUT ANY JUSTIFICATION AND IN VIEW OF THE SAME THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF SHORTAGE AMOUNTING TO ` 28,32,773, IS UNJUST AND WITHOUT BASIS AND IS HEREBY DIRECTED TO BE DELETED. 7. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. SHRI PERMANAND RAMAVATAR AGRAWAL 6 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACC OUNT AS HE HAS OBSERVED THAT PERCENTAGE OF SHORTAGES CLAIMED HAS I NCREASED IN SOME OF THE ITEMS TRADED. HE ALSO SUBMITTED THAT THE ASSESSIN G OFFICER HAS ALSO COMPARED THE FIGURES FROM ANOTHER TRADER M/S. JAI AMBE TRADERS, AND THEREAFTER, HE HAS REJECTED THE ASSESSEES BOOKS OF ACC OUNT. HENCE, HE SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER SHOULD BE RES TORED. 9. PER CONTRA, THE LEARNED COUNSEL FOR THE ASSESSEE RELIE D UPON THE ORDERS OF THE LEARNED CIT(A). HE SUBMITTED THAT THERE A RE VARIATIONS IN SHORTAGE AS COMPARED TO PREVIOUS YEAR BOTH UPWARD A ND DOWNWARD IN DIFFERENT ITEMS. HE SUBMITTED THAT THE ASSESSING OFFICER HAS TOTALLY IGNORED THE ITEMS WHERE SHORTAGES HAVE DECREASED BU T HAS TAKEN THE INSTANCES OF INCREASE IN SHORTAGES AS BASIS FOR REJEC TION OF BOOKS OF ACCOUNT. HE SUBMITTED THAT THIS CANNOT BE A BASIS OF REJECTION ON BOOKS OF ACCOUNT. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT FOUND ANY MISTAKE WHATSOEVER. THE BOOKS OF ACCOUNT WHICH WERE P RODUCED ARE DULY AUDITED. HE SUBMITTED THAT THE GROSS PROFIT PERC ENTAGE AND NET PROFIT PERCENTAGE ARE SIGNIFICANTLY HIGHER THAN THE I MMEDIATELY PRECEDING YEAR. ACCORDINGLY, HE PLEADED THAT THE LEARN ED CIT(A)S ORDER SHOULD BE UPHELD. THE LEARNED COUNSEL FOR THE ASSESSE E FURTHER PLACED RELIANCE ON THE FOLLOWING CASE LAWS: SHRI PERMANAND RAMAVATAR AGRAWAL 7 I) KISHANCHAND CHELLARAM V/S CIT, [1980] 125 ITR 713; II) CIT V/S JACK ELEGANCE EXPORTS, [2010] 324 ITR 95; III) CIT V/S OM OVERSEAS, [2009] 315 ITR 185; AND IV) CIT V/S MASCOT (INDIA) TOOLS & FORGINGS P. LTD., [2010] 3 20 ITR 116. 10. UPON CAREFUL CONSIDERATION, WE NOTE THAT IT IS UNDISPU TED THAT THE GROSS PROFIT PERCENTAGE AND NET PROFIT PERCENTAGE OF THE ASSESSEE IS SIGNIFICANTLY HIGHER THAN THE IMMEDIATELY PRECEDING YEAR. THE BOOKS OF ACCOUNT ARE DULY SUPPORTED BY VOUCHERS AND STOCK RE CORDS. NO DEFECT HAS BEEN FOUND BY THE ASSESSING OFFICER IN THE SAME. OUT OF THE FIVE ITEMS TRADED, IN THREE ITEMS, THE SHORTAGES HAVE INCR EASED AS COMPARED TO PREVIOUS YEAR BUT AT THE SAME TIME, THERE IS VAST IMPROVEMENT IN OTHER TWO ITEMS. THIS GOES TO SUBSTANTIATE THE ASSES SEES CONTENTION AND LEARNED CIT(A)S FINDING THAT VARIOUS FACTORS LEAD TO THE VARIATION SUCH AS QUALITY OF GOODS PURCHASED, MONTH IN WHICH PU RCHASES ARE MADE, THE PERIOD FOR WHICH THE GOODS ARE LYING WITH T HE PURCHASER, THE METHOD OF TRANSPORT USED, THE AMOUNT OF EARTH / OTHER PURITIES IN THE GOODS PURCHASED. IT CANNOT BE SAID THAT THERE IS MA NIPULATION BY THE ASSESSEE. THE SHORTAGES OBSERVED ARE ALSO NOT SUBSTA NTIAL. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ASSESSI NG OFFICER CANNOT INSIST UPON THE MATHEMATICAL PRECESSION IN THE LEVE L OF VARIATION IN SHORTAGES. MOREOVER, AS RIGHTLY COMMENTED BY THE LEAR NED CIT(A), IN THE ABSENCE OF DETAIL REGARDING THE BUSINESS PATTERN OF M/S. JAI AMBE SHRI PERMANAND RAMAVATAR AGRAWAL 8 TRADERS, THEIR RESULTS CANNOT BE THE SOLE CRITERIA FO R JUDGING THAT THE ASSESSEES BOOKS OF ACCOUNT ARE NOT RELIABLE. UNDER TH ESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ASSESSI NG OFFICER HAS NOT BROUGHT ON RECORD COGENT BASIS FOR REJECTION OF BOOKS OF ACCOUNT. THE LEARNED CIT(A) IS CORRECT IN HOLDING THAT THERE IS NO REASON TO REJECT THE BOOKS OF ACCOUNT AND, ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.08.2015 SD/ - MUKUL K. SHRAWAT JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER NAGPUR, DATED: 21.08.2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A SSISTANT REGISTRAR ITAT, NAGPUR