M/S RASHTRADOOT HUF, Jaipur V. DCIT, Jaipur

ITA 530/JPR/2011

• Counselvise Citation: 53023114 RSA 2011
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1998-1999
• Appeal Filed On: 31-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: G G MUNDRA
• Keywords: Rejection of books of accounts; Block assessment
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH, A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NO.530 /JP/2011 ASSESSMENT YEAR : 1998-1999 M/S. RASHTRADOOT (HUF), VS. DY. COMMISSIONER OF INCOME TAX JAIPUR. COMPANY CIRCLE-2, JAIPUR. (APPELLANT) (RESPONDENT) ITA NO.535/JP/2011) ASSESSMENT YEAR : 1998-1999 INCOME TAX OFFICER, VS. M/S. RASHTRADOOT (HUF), WARD-2(2), SUDHARMA, M.I. ROAD, JAIPUR. JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.G. MUNDRA DEPARTMENT BY : SHRI D.K. MEENA ORDER DATE OF HEARING: 28.12.2011 DATE OF PRONOUNCEMENT: 30.12.2011 PER SHRI N.L. KALRA, A.M. 1. THE ASSESSEE AS WELL AS REVENUE HAS FILED APPEAL S AGAINST ORDER OF LD. CIT (A) III, JAIPUR DATED 16.3.2011. THE FIRST GROUND OF APPEAL OF ASSE SSEE IS AS UNDER: 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT (A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIRMING REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT BY THE ASSESSING OFFICER U/S 145 (3) OF T HE I.T. ACT, 1961. 1.1 THE A.O. NOTICED THAT OUT OF PURCHASES OF RS.3. 54 CRORES, ONLY PURCHASES TO THE EXTENT OF RS.45 LAKHS ARE NOT CASH PURCHASES. PAYMENTS IN RES PECT OF EXPENSES ARE ALSO IN CASH. VOUCHERS ARE NOT AVAILABLE. THE A.O. ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 145 (3) OF I.T. ACT. 1.2 THE LD. CIT (A) HAS OBSERVED AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS OF LD. AR. HOWEVER, ON PERUSAL OF THE RELEVANT RECORD, IT IS S EEN THAT THERE IS NO DISPUTE REGARDING THE FACT THAT A SUBSTANTIAL PART OF THE A PPELLANTS PURCHASES AND CLAIMED EXPENSES ARE NOT FULLY VERIFIABLE. THEREFOR E, WHEN THE CLAIMED PURCHASES/EXPENSES REMAIN UNVERIFIABLE, THE SAME CO NSTITUTES A DEFECT IN THE BOOKS OF ACCOUNT AND THUS, SUCH BOOKS OF ACCOUNT AR E LIABLE TO BE REJECTED U/S 145(3) OF THE I.T. ACT. THIS VIEW IS SUPPORTED BY T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS V/S JCIT, 288 IT R 10 (SC). HENCE, THE ACTION OF THE AO IN REJECTING THE APPELLANTS BOOKS OF ACCOUNT IS CONFIRMED. 1.3 AFTER HEAVING BOTH THE PARTIES AND CONSIDERING OUR CONSISTENT FINDING THAT BOOKS OF ACCOUNTS ARE TO BE REJECTED, IF PURCHASES ARE NOT V ERIFIABLE. HENCE WE UPHOLD THAT LD. CIT (A) WAS JUSTIFIED IN HOLDING THAT PROVISIONS OF SECTION 145 (3) ARE APPLICABLE. 2. THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS A GAINST DISALLOWANCE OF LOSS OF RS.5,29,580/- WHILE THE REVENUE IS AGAINST THE RELI EF OF RS.15 LAKH. 2.1 THE A.O. AFTER INVOKING THE PROVISIONS OF SECTI ON 145(3) HELD THAT BOOKS RESULTS ARE NOT ACCEPTABLE AND ACCORDINGLY REDUCED THE LOSS OF RS.2 0,29,580/- AT NIL. 2.2 BEFORE THE LD. CIT (A), THE ASSESSEE SUBMITTED AS UNDER: IT WAS ARGUED THAT IN THE CASE OF PUBLISHERS OF NEW SPAPERS, IT WAS AN ESTABLISHED FACT THAT GENERALLY THERE IS LOSS IN THE MAIN ACTIV ITY OF PUBLISHING OF THE NEWSPAPER, BECAUSE THE COST OF PUBLICATION OF THE N EWSPAPERS WAS ALWAYS MUCH 3 HIGHER THAN THE RECEIPT FROM THE SALE OF THE NEWSPA PERS, WHICH WAS MADE GOOD BY OTHER INCOME, SUCH AS, ADVERTISEMENT RECEIPTS/COMMI SSIONS ETC. IT WAS SUBMITTED THAT THE SAID FACTS HAVE BEEN TAKEN NOTE OF BY THE LD. CIT (A)/HONBLE ITAT IN THE APPELLATE ORDERS PASSED FOR THE BLOCK PERIOD IN THE APPELLANTS CASE. IT WAS POINTED OUT THAT THE HONBLE TRIBUNAL, AFTER TAKING INTO ACCOUNT THE NATURE OF APPELLANTS BUSINESS, CASH PURCHASES/EXPENSES, ETC. HAD DELETED THE ENTIRE ADDITION OF THE UNDISCLOSED INCOME, MADE AS PER THE ASSESSMENT ORDER PASSED FOR THE BLOCK PERIOD OF 1.4.1987 TO 4.9.1997. LD. AR PL ACED A COPY OF THE SAID ORDER OF THE HONBLE ITAT JAIPUR BENCH PASSED IN ITSSA NO S.29/JP/2000 & 37/JP/2000, DATED 24.5.2001 IN THE APPELLANTS CASE FOR THE BLOCK PERIOD 1.4.1987 TO 4.9.1997, ON RECORD. IT WAS CONTENDED THAT AFTER THE SAID ORDER OF THE HONBLE TRIBUNAL, NOT FINDING ANY UNDISCLOSED INCOME IN THE APPELLANTS CASE, THE RETURNED LOSS BY THE APPELLANT, AS PER THE REGULAR RETURNS O F INCOME, STOOD ACCEPTED. IT WAS ARGUED THAT, AS PER THE PAST HISTORY, AS THE APPELL ANT WAS INCURRING LOSSES IN BUSINESS, DUE TO STIFF COMPETITION FROM THE OTHER E STABLISHED NEWSPAPERS, THE LD. AO SHOULD HAVE ACCEPTED THE DECLARED TOTAL LOSS OF RS.20,29,580/- FOR THIS YEAR BY THE APPELLANT. IN SUPPORT, LD. AR PLACED RELEVANT D ETAILS/DOCUMENTS, RELATED TO THE EARLIER A.YRS. , IN THE APPELLANTS CASE. IN THIS R ESPECT, LD. AR FILED A CHART AND SPECIFICALLY POINTED OUT THAT THE APPELLANT HAD INC URRED A NET LOSS OF RS.4.90 LACS (- 1.04%) IN THE IMMEDIATELY PRECEDING YEAR ALSO AN D THAT THE ADVERTISEMENT RECEIPTS IN THIS YEAR WERE LOWER BY RS.25.64 LACS A S COMPARED TO THE LAST YEAR. IT WAS PLEADED THAT, THEREFORE, THE ACTION OF THE AO I N REDUCING THE DECLARED LOSS TO NIL BE REVERSED AND THE NET LOSS DECLARED BY THE AS SESSEE AT RS.20,29,580/- BE ACCEPTED. 2.3 THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIO NS HELD AS UNDER: ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE ASSESSE ES PROFIT/LOSS IS TO BE ESTIMATED AT A REASONABLE LEVEL AND AFTER CONSIDERI NG THE RELEVANT DETAILS/DOCUMENTS ON RECORD. IN THIS REGARD, THE AS SESSEES OWN PAST HISTORY AND THE TRADING RESULTS DECLARED BY SOME OTHER COMPARAB LE ASSESSES COULD BE IMPORTANT GUIDING FACTORS. THEREFORE, AS THE LD. AO HAS NOT REFERRED TO ANY OTHER COMPARABLE ASSESSES COULD BE IMPORTANT GUIDING FACT ORS. THEREFORE, AS THE LD. AO. HAS NOT REFERRED TO ANY OTHER COMPARABLE CASE, FOR ESTIMATING THE APPELLANTS TOTAL INCOME/LOSS AT RS.NIL, I FIND IT REASONABLE T O REFER TO THE APPELLANTS OWN PAST HISTORY. IN THIS RESPECT, IT IS OBSERVED THAT THE A PPELLANT HAD DECLARED A NET LOSS OF RS.4.90 LACS ON THE TOTAL TURNOVER OF RS.472.14 LAC S, GIVING A NET LOSS RATE OF 1.04%, IN THE IMMEDIATELY PRECEDING A.Y. OF 1997-98 , AS COMPARED TO THE NET LOSS OF ABOUT RS.21 LACS, GIVING A NET LOSS RATE OF 2.99 % IN THIS YEAR. HOWEVER, IT IS FURTHER NOTED THAT THE APPELLANTS ADVERTISEMENT RE CEIPTS AT RS.295.67 LACS IN THIS YEAR, WERE LOWER BY ABOUT RS.25 LACS, AS COMPARED T O THE ADVERTISEMENT RECEIPTS OF RS.321.31 LACS IN THE LAST YEAR. THEREFORE, CONS IDERING BOTH OF THE ABOVE FACTS, I FIND IT REASONABLE TO ESTIMATE THE APPELLANTS NE T LOSS AT RS.15 LACS IN THIS YEAR, 4 AGAINST THE DECLARED NET LOSS OF RS.20,29,580/-. AC CORDINGLY, THE IMPUGNED DISALLOWANCE OF LOSS IS SUSTAINED TO THE EXTENT OF RS.5,29,580/-. 2.4 BEFORE US THE LD. A/R SUBMITTED AS UNDER: THE CIT (A) AFTER CONFIRMING APPLICATION OF PROVISI ONS OF SECTION 145 (3) COMPARED PAST HISTORY OF THE CASE AND UPHELD DISALL OWANCE OF RS.5,29,580/-. THE ASSESSEE EXPLAINED THAT FALL IN N.P. RATE OF THIS Y EAR IS DUE TO LESSER ADVERTISEMENT RECEIPT IN THE YEAR I.E. RS.295.67 LACS AND COMPARE D TO 321.31 LACS OF LAST YEAR. THE ADVERTISEMENT RECEIPTS ARE FOUND FULLY VERIFIAB LE AND ACCEPTED IN ASSESSMENT AS WELL AS LD. CIT (A) ALSO ACCEPTED THIS. IF THIS ASPECT IS CONSIDERED THE N.P. RATE FOR THIS YEAR WILL WORK OUT BETTER AS COMPARED TO I MMEDIATELY PRECEDING YEARS. IN LAST YEAR N.P. RATE WAS (-) 1.04% WHILE IN THIS YEA R IT IS (-) 2.99% AND ON REDUCING THE IMPACT OF LOW ADVERTISEMENT RECEIPTS T HIS YEAR N.P. RATE WILL WORK OUT TO (+) 0.57%. IN VIEW OF THESE FACTS THE LD. CI T (A) IS WRONG IN UPHOLDING THE DISALLOWANCE OF LOSS TO THE EXTENT OF RS.5,29,580/- WHICH DESERVES TO BE DELETED. 2.5 ON THE OTHER HAND THE LD. D/R RELIED ON THE ORD ER OF A.O. 2.6 WE HAVE HEARD BOTH THE PARTIES. THE ITAT JAIPUR BENCH IN THE CASE OF THE ASSESSEE WHILE DECIDING APPEAL AGAINST BLOCK ASSESSMENT IN ITSSA N O.29 & 37/JP/2000 VIDE ORDER DATED 24.5.2001 QUOTED THE FOLLOWING FINDINGS OF LD. CIT (A). I HAVE GIVEN DEEP THOUGHT TO THIS EXPLANATION. IT C ANNOT BE DENIED THAT NORMALLY THE QUOTA OF NEWSPRINT RECEIVED BY NEWS PAPERS FOR PRINTING PURPOSES IS LESS THAN THE ACTUAL REQUIREMENT OF PAPERS FOR THEIR CIRCULAT ION. PERHAPS THE APPELLANT WAS ONE SUCH NEWS PAPER WHICH REQUIRED TO MAKE PURCHASE S IN THE BLACK MARKET AND THESE PURCHASES WERE MADE IN CASH. IT CAN ALSO BE A PPRECIATED THAT THIS NEWSPAPER WAS FACING STIFF COMPETITION FROM OTHER N EWS PAPERS PRINTED FORM JAIPUR AND MAY HAVE FELT THE NECESSITY TO INFLATE T HE CIRCULATION FIGURES TO GET MORE ADVERTISEMENT IN ORDER TO SURVIVE IN THE FACE OF STIFF COMPETITION. ADMITTEDLY ALSO THE COST OF PUBLICATION OF NEWS PAPERS IS HIGH ER THAN THE RECEIPTS FROM SALE OF THOSE NEWS PAPERS AND THE LOSSES ARE OFTEN MADE GOO D BY OTHER INCOME FROM COMMISSION AND ADVERTISEMENT RECEIPTS. THEREFORE, T AKING AN OVERALL VIEW OF THE MATTER, THERE WOULD BE REASONABLE ARGUMENT FROM THE APPELLANT THAT HE WAS REQUIRED TO MADE CASH PURCHASES FROM THE MARKET. FROM THE FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL ON RECORD BEFORE US, IT IS EVIDENT FROM THAT THE ONLY PURPOSE OF INFLATING THE PURCHASES AS WELL AS SALES IS TO SHOW HIGHER CIRCULATION TO THE REGISTRAR OF NEWS PAPER, GOVT. OF INDIA, R.K. PURAM, NEW DELHI, SO AS TO EARN BETTER RATES OF ADV ERTISEMENT AS OTHERWISE THE 5 BUSINESS OF THE ASSESSEE OF PUBLICATION RESULTS INT O A LOSS. THE HIGHER RATES OF ADVERTISEMENT SO RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT ARE FOUND DULY DISCLOSED IN THE REGULAR RETURNS OF INCOME FILED BY THE ASSESSEE. IT IS NOT THE CASE OF THE AO NOR THE LD. D/R HAS BROUGHT ANY ADVERSE M ATERIAL BEFORE US TO SHOW THAT BY ADOPTING THE MODUS OPERANDI OR BY INFLATING THE PURCHASES AND SALES, THE INCOME BY WAY OF HIGHER ADVERTISEMENT CHARGES RECEI VED BY THE ASSESSEE IS NOT RECORDED IN ITS BOOKS OF ACCOUNT. 3. THE COMPARATIVE CHART OF THIS YEAR AS COMPARED T O LAST YEAR AS PER PAPER BOOKS IS AS UNDER: A.Y. 99-98 A.Y. 98-99 (IN LAKH) (IN LAKH) NEWS PAPER SALE 150.83 424.55 ADVT. 321.31 295.67 DIRECT EXP. PAPER 276.91 (58.65%) 524.84 (72.87% ) PRINTING AND CONSUMABLE 70.62 (14.96%) 56.53 (7.8 5%) ADVT. COLLECTION EXP. 19.11 (4.05%) 32.2 (4.47% ) GROSS PROFIT 22.35% 14.81% NET PROFIT -1.04% -2.99% 4. IF ADVT. RECEIPTS ARE NOT CONSIDERED THAN COST O F PAPER IS 183.6% WHILE DURING THE YEAR IT IS 123.6%. THE FALL IN NET PROFIT IS ON ACCOUNT OF LESSER RECEIPTS FROM ADVERTISEMENT. THE REVENUE HAS NOT REFERRED TO ANY OTHER COMPARABLE CASE. HENC E FALL IN GROSS PROFIT STANDS EXPLAINED. HENCE LOOKING TO THE ORDER OF TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE BLOCK PERIOD, WE DELETE THE ENTIRE ADDITION. ACCORDINGLY THE APPEAL OF ASSESSEE IS ALLOWED WHILE APPEAL OF REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 30.12.201 1 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER 6 DATED: 30.12.2011 *S.KUMAR* COPY FORWARDED TO:- 1. M/S. RASHTRADOOT (HUF), JAIPUR. 2. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCL E-2, JAIPUR. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.530 & 535/JP/2011 BY ORDER A.R., I.T.A.T., JAIPUR